Using ESPlanner to Consider Tax Reforms, e.g., the FairTax

You can use ESPlanner to consider simple tax reforms.

Let me illustrate with the FairTax. This is a proposal to replace all federal taxes, apart from excise taxes, with A) a retail sales tax levied at a 23 percent effective rate and B) a highly progressive tax rebate, the details for which are provided at: http://www.fairtax.org/PDF/FairTaxPrebateExplained2007.pdf

To consider the FairTax you would run ESPlanner under the current system and then copy your profile (using the Save As button) and modify the FairTax profile as follows:

1. Go to the Assumptions folder, click on Taxes, specify that federal income and payroll taxes will be changed starting in the current year and that the change will be - 100 percent. This will turn off these taxes.

2. Run the program and then divide all the consumption and living standard numbers by 1.30.

3. Next compare the initial profile's consumption and living standard values with those arising from following step 2.

best, Larry