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August/September 1985, 
Vol. 67, No. 7
Posted 1985-08-01

The President's Proposed Corporate Tax Reforms: A Move Toward Tax Neutrality

by Dallas S. Batten and Mack Ott

In the first article of this Review, “The President’s Proposed Tax Reforms: A Move Toward Neutrality,” authors Dallas S. Batten and Mack Ott argue that the suggested reforms would increase production and national welfare. Beginning with a simple illustration of how taxes can alter the allocation of economic resources, the authors demonstrate how the proposed reforms would reduce such allocative distortions. Batten and Ott argue that this aspect of the proposed tax reform has been overlooked in most critiques of the proposals, such critiques concentrating on macroeconomic impacts or the possible loss of subsidies to particular interest groups. The authors note also that removing subsidies and making the tax code relatively more neutral would improve the productivity of investment, measured by its before-tax rate of return.