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Effects of Dividend Relief on Economic Growth, the Stock Market, and Corporate Tax Preferences

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  • Gravelle, Jane G.
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    Abstract

    Dividend relief was proposed for economic stimulus and growth, but is unlikely to be an effective stimulus because much of the tax benefit may be saved. Nor is it likely to affect demand independently through a rise in the stock market: these values only affect pending of stockholders (through income effects). Even if there is a separate effect on consumer or business confidence, the effect on the stock market is unlikely to be large enough to be noticeable. A deficit-financed capital income tax cut would, however, ultimately reduce the capital stock.

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    Bibliographic Info

    Article provided by National Tax Association in its journal National Tax Journal.

    Volume (Year): 56 (2003)
    Issue (Month): 3 (September Citation: 56 National Tax Journal 653-72 (September 2003))
    Pages: 653-72

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    Handle: RePEc:ntj:journl:v:56:y:2003:i:3:p:653-72

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    1. Engen, Eric M. & Gravelle, Jane G. & Smetters, Kent, 1997. "Dynamic Tax Models: Why They Do the Things They Do," National Tax Journal, National Tax Association, vol. 50(3), pages 657-82, September.
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    Cited by:
    1. Randall Morck & Bernard Yeung, 2005. "Dividend Taxation and Corporate Governance," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 163-180, Summer.
    2. James Poterba, 2004. "Taxation and Corporate Payout Policy," American Economic Review, American Economic Association, vol. 94(2), pages 171-175, May.
    3. Richard W. Kopcke, 2005. "The taxation of equity, dividends, and stock prices," Public Policy Discussion Paper 05-1, Federal Reserve Bank of Boston.

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