IS REVENUE-NEUTRAL TAX-REFORM REVENUE NEUTRAL

When political factors are taken into account, tax reform intended to be revenue neutral is likely to increase tax revenues. Any reduction i n the excess burden of the tax system is likely to increase government revenues because the marginal political cost of tax increases is redu ced Evidence from the 1986 tax reform in the United States and the ado ption of the value-added tax in many European countries, where the ref orms were claimed to be revenue neutral, is consistent with the hypoth esis that ''revenue neutral'' tax reform generates more government rev enue.