Download file 1.679 KB Texto completo en español More of: Christian Johnson

This article evaluates alternative tax structures that keep revenue stable, while reducing distortions and boosting economic growth. Using a real-business-cycle model with money and both direct and indirect taxes, a system based solely on value added tax (VAT) at a flat rate of 25% is found to be superior from the social-welfare standpoint, and revenue equivalent, to the current tax structure. To move from the current structure to the one proposed, the author recommends creating a system of vouchers to enable low-income families to gain access to the same consumption basket as before the reform.