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A Disaggregate Equilibrium Model of the Tax Distortions among Assets, Sectors, and Industries

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  • Fullerton, Don
  • Henderson, Yolanda Kodrzycki

Abstract

This paper encompasses multiple sources of inefficiency into a single general equilibrium model of the U.S. tax system. The authors measure interasset distortions using disaggregate calculations of user cost, and intersectoral distortions from the differential treatment of the corporate sector, noncorporate sector, and owner-occupied housing. Industries in the model have different uses of assets and degrees of incorporation. Results indicate that distortions between sectors, or among industries, are much smaller than previously thought. Distortions among assets are larger, but the total of all these welfare costs is still below one percent of income. Copyright 1989 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 30 (1989)
Issue (Month): 2 (May)
Pages: 391-413

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Handle: RePEc:ier:iecrev:v:30:y:1989:i:2:p:391-413

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References

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  1. Fullerton, Don & Henderson, Yolanda Kodrzycki, 1985. "Long-run Effects of the Accelerated Cost Recovery System," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 363-72, August.
  2. Mervyn A. King & Don Fullerton, 1983. "The Taxation of Income from Capital: A Comparative Study of the U.S., U.K., Sweden, and West Germany--The Theoretical Framework--," NBER Working Papers 1058, National Bureau of Economic Research, Inc.
  3. Bradford, David F., 1981. "The incidence and allocation effects of a tax on corporate distributions," Journal of Public Economics, Elsevier, vol. 15(1), pages 1-22, February.
  4. Liam P. Ebrill & David G. Hartman, 1983. "The Corporate Income Tax, Entrepreneurship, and the Noncorporate Sector," Public Finance Review, , vol. 11(4), pages 419-436, October.
  5. Barry P. Bosworth, 1985. "Taxes and the Investment Recovery," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(1), pages 1-45.
  6. James M. Poterba & Lawrence H. Summers, 1981. "Dividend Taxes, Corporate Investment, and "Q"," NBER Working Papers 0829, National Bureau of Economic Research, Inc.
  7. Charles L. Ballard & Don Fullerton & John B. Shoven & John Whalley, 1985. "Replacing the Personal Income Tax with a Progressive Consumption Tax," NBER Chapters, in: A General Equilibrium Model for Tax Policy Evaluation, pages 171-187 National Bureau of Economic Research, Inc.
  8. Don Fullerton & Roger H. Gordon, 1983. "A Reexamination of Tax Distortions in General Equilibrium Models," NBER Chapters, in: Behavioral Simulation Methods in Tax Policy Analysis, pages 369-426 National Bureau of Economic Research, Inc.
  9. Feldstein, Martin & Dicks-Mireaux, Louis & Poterba, James, 1983. "The effective tax rate and the pretax rate of return," Journal of Public Economics, Elsevier, vol. 21(2), pages 129-158, July.
  10. Alan J. Auerbach, 1982. "Taxes, Firm Financial Policy and the Cost of Capital: An Empirical Analysis," NBER Working Papers 0955, National Bureau of Economic Research, Inc.
  11. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70, pages 215.
  12. Shoven, John B. & Whalley, John, 1972. "A general equilibrium calculation of the effects of differential taxation of income from capital in the U.S," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 281-321, November.
  13. Charles L. Ballard & Don Fullerton & John B. Shoven & John Whalley, 1985. "A General Equilibrium Model for Tax Policy Evaluation," NBER Books, National Bureau of Economic Research, Inc, number ball85-1, octubre-d.
  14. Shoven, John B, 1976. "The Incidence and Efficiency Effects of Taxes on Income from Capital," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1261-83, December.
  15. Alan J. Auerbach, 1985. "Real Determinants of Corporate Leverage," NBER Chapters, in: Corporate Capital Structures in the United States, pages 301-324 National Bureau of Economic Research, Inc.
  16. Don Fullerton, 1983. "Which Effective Tax Rate?," NBER Working Papers 1123, National Bureau of Economic Research, Inc.
  17. Don Fullerton, 1985. "The Indexation of Interest, Depreciation, and Capital Gains: A Model ofInvestment Incentives," NBER Working Papers 1655, National Bureau of Economic Research, Inc.
  18. Patric H. Hendershott, 1985. "Tax Reform, Interest Rates and Capital Allocation," NBER Working Papers 1708, National Bureau of Economic Research, Inc.
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Cited by:
  1. Patric H. Hendershott, 1988. "The Tax Reform Act Of 1986 And Economic Growth," NBER Working Papers 2553, National Bureau of Economic Research, Inc.
  2. Estelle P. Dauchy, 2013. "The Efficiency Cost of Asset Taxation in the U.S. after Accounting for Intangible Assets," Working Papers w0199, Center for Economic and Financial Research (CEFIR).
  3. Fullerton, Don & Mackie, James B. III, 1989. "Economic Efficiency in Recent Tax Reform History: Policy Reversals or Consistent Improvements?," National Tax Journal, National Tax Association, vol. 42(1), pages 1-13, March.
  4. Don Fullerton & Yolanda Henderson, 1987. "The Impact of Fundamental Tax Reform on the Allocation of Resources," NBER Chapters, in: Taxes and Capital Formation, pages 101-104 National Bureau of Economic Research, Inc.
  5. Fehr, Hans, 1999. "Welfare Effects of Dynamic Tax Reforms," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, edition 1, volume 5, number urn:isbn:9783161470165, July.
  6. Bob Hamilton & Jack Mintz & John Whalley, 1991. "Decomposing the Welfare Costs of Capital Tax Distortions: The Importance of Risk Assumptions," NBER Working Papers 3628, National Bureau of Economic Research, Inc.
  7. Holmoy, Erling & Vennemo, Haakon, 1995. "A general equilibrium assessment of a suggested reform in capital income taxation," Journal of Policy Modeling, Elsevier, vol. 17(6), pages 531-556, December.

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