- Moving to a flat statutory rate of 4.25% (as in Michigan) increases output and
household consumption by more than 2.4%, and the impact is greater when the
rate is lower, for example, 3.05% as in Indiana or 2.50% as in Arizona. - Since the effective tax rate is higher than the statutory rate for most middleincome
households due to the sliding scale standard deductions, moving to a
flat effective rate of 4.25% requires a larger reduction in the second highest
statutory rate and has a larger impact on output and household consumption. - When a larger share of government revenue is transferred back to households,
it raises the disposable income for each dollar of gross income earned by a
household. This has a positive effect on labor supply and the economy.
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