Tax Policy:

Economic, Administrative, and Taxpayer Compliance Aspects of a Gross Income Tax

GGD-89-36: Published: Feb 16, 1989. Publicly Released: Feb 16, 1989.

Additional Materials:


Office of Public Affairs
(202) 512-4800

In response to a congressional request, GAO reviewed Department of the Treasury and Congressional Research Service (CRS) tax policy literature and studies to: (1) identify the general economic effects of the proposed gross income tax; and (2) compare certain administrative and taxpayer compliance aspects of the tax with the current tax system.

GAO found that a gross income tax system would: (1) reduce competition by providing an incentive for producers and suppliers to merge; (2) tax firms that earned little net income or suffered a loss; (3) be a disincentive to investment because it would raise the effective marginal tax rate on capital; and (4) shift the distribution of the tax burden to lower income people. GAO also found that: (1) the proposed gross tax would be a cascading transactions tax, since it would tax the same business inputs more than once; (2) proponents believed that a gross income tax would reduce administrative and taxpayer compliance costs if it replaced corporate and personal income taxes; (3) the Internal Revenue Service (IRS) believed that a gross income tax would neither simplify the tax system nor reduce its administrative costs, and the transition to such a system would place an overwhelming burden on IRS; and (4) a gross income tax system would not be preferable to the current system even if it were less costly, because of its potential for greater economic distortion.

Jan 30, 2018

Dec 20, 2017

Dec 18, 2017

Nov 30, 2017

Nov 28, 2017

Sep 6, 2017

May 18, 2017

May 17, 2017

Apr 27, 2017

Apr 26, 2017

Looking for more? Browse all our products here