Gradual Reforms of Capital Income Taxation

Howitt, Peter; Sinn, Hans-Werner (1989): Gradual Reforms of Capital Income Taxation. In: The American Economic Review, Vol. 79, No. 1: pp. 106-124

Abstract

This paper analyzes the intertemporal allocation effects of anticipated tax rate changes, reconsidering the recommendations of the Meade Committee in a perfect foresight general equilibrium model of economic growth. It is shown that the R-base (or consumption) tax can be more distortionary than an income tax and that a revenue-neutral integration of corporate and personal taxation will lower social welfare. Moreover, it is argued that a dividend tax dominates the R-base tax because it places its distortions on the financial, rather than on the real, side of the economy. Copyright 1989 by American Economic Association.

• Item Type: Journal article
• Faculties: Economics; Economics > Chairs > Chair for Public Economics
• Subjects: 300 Social sciences > 330 Economics
• Language: English