FairTax Overview
(1) THE ECONOMIC EFFECTS OF THE FAIRTAX: RESULTS FROM THE BEACON HILL INSTITUTE CGE
MODEL97
The first study employs a dynamic computable general equilibrium (CGE) model to estimate the impact of the
FairTax plan on the economy. Although complex, CGE models make it possible to analyze large changes in
existing taxes or the introduction of new taxes for their effects on a wide array of economic indicators. The chart
below shows how much higher the growth in certain economic variables would be under the FairTax than if the
current federal income tax system were to remain in place, for Years 1, 5, and 10, after the implementation of the
FairTax.
Real GDP would be 8% higher in the first year than under the income tax system, 11% higher in Year 5 and 11%
percent higher in Year 10.
Job growth would be 12% higher in Year 1, 10% higher in Year 5 and 8% higher in Year 10. Apply these results
to the current level of employment, 133 million, means in just one year, the FairTax would have created 13.3
million more jobs than if the current income tax system remained in place.
Investment would be 75% higher in Year 1, 86% higher in Year 5 and 76% higher in Year 10 reflecting the
growth due to no taxes on savings and investment income.
Wages would be 10% higher in Years 1, 5 and 10.
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See David G. Tuerck, et.al., “The Economic Effects of the FairTax: Results from the Beacon Hill Institute CGE Model,”
The Beacon Hill Institute at Suffolk University, February 2007.
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