Effects of flat tax reforms on economic growth in the OECD countries

Abstract

This paper explores how a transition from a progressive to a flat tax scheme would affect economic growth in the OECD countries on the period from 1997 to 2007. A meta-regression analysis on eighteen calibration studies on flat tax reforms provides robust results of the mean tax elasticity as well as estimates for long run growth. Based on the 2006/2007 level of tax progressivity and tax elasticity, the average growth potential is found to be around 6.75 percent, translating into a growth potential of 9.16 percent in real output for the OECD area.