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Risky Assets and the Choice of Tax Base

Author

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  • Ira Horowitz

    (University of Florida)

  • R. Horowitz

    (University of Florida)

Abstract

Using a two-period model in which income is earned in the first period and saving can be invested in a risky asset, the authors explore the implications of the wealth tax and the consumption tax approaches for both the government and the wage earner. Settings under which decisions are made through Marshallian utility functions and settings under which decisions are made through von Neumann-Morgenstern risk preference functions are clarified. This is an issue that has suffered from benign neglect in this literature. It is shown that the implications of uncertainty for tax policy are much greater than has hitherto been implied.

Suggested Citation

  • Ira Horowitz & R. Horowitz, 1999. "Risky Assets and the Choice of Tax Base," Public Finance Review, , vol. 27(5), pages 467-480, September.
    • Handle: RePEc:sae:pubfin:v:27:y:1999:i:5:p:467-480
    DOI: 10.1177/109114219902700501
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    References listed on IDEAS

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    1. Grieson, Ronald E & Musgrave, Richard A, 1985. "Wealth Utility and Tax Neutrality," Public Finance = Finances publiques, , vol. 40(2), pages 168-171.
    2. Ahsan, Syed M., 1989. "Choice of tax base under uncertainty : Consumption or income?," Journal of Public Economics, Elsevier, vol. 40(1), pages 99-134, October.
    3. Kaplow, Louis, 1994. "Taxation and Risk Taking: A General Equilibrium Perspective," National Tax Journal, National Tax Association, vol. 47(4), pages 789-98, December.
    4. Miguel-Angel Lopez-Garcia, 1997. "When) is Consumption Taxation Equivalent to Wage Taxation ?," Public Finance Review, , vol. 25(1), pages 83-101, January.
    5. Syed M. Ahsan, 1990. "Risk-Taking, Savings, and Taxation: A Re-examination of Theory and Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 23(2), pages 408-433, May.
    6. McLure, Charles E. Jr., 1992. "Substituting Consumption-Based Direct Taxation for Income Taxes as the International Norm," National Tax Journal, National Tax Association, vol. 45(2), pages 145-54, June.
    7. Syed Ahsan & Peter Tsigaris, 1998. "The design of a consumption tax under capital risk," Journal of Economics, Springer, vol. 68(1), pages 53-78, February.
    8. Kaplow, Louis, 1994. "Taxation and Risk Taking: A General Equilibrium Perspective," National Tax Journal, National Tax Association;National Tax Journal, vol. 47(4), pages 789-798, December.
    9. George R. Zodrow, 2019. "Taxation, Uncertainty and the Choice of a Consumption Tax Base," World Scientific Book Chapters, in: George R Zodrow (ed.), TAXATION IN THEORY AND PRACTICE Selected Essays of George R. Zodrow, chapter 8, pages 227-237, World Scientific Publishing Co. Pte. Ltd..
    10. McLure, Charles E. Jr., 1992. "Substituting Consumption-Based Direct Taxation for Income Taxes as the International Norm," National Tax Journal, National Tax Association;National Tax Journal, vol. 45(2), pages 145-154, June.
    11. Zee, Howell H, 1994. "Time-Consistent Optimal Intertemporal Taxation in Externally-Indebted Economies," Public Finance = Finances publiques, , vol. 49(1), pages 113-125.
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    Cited by:

    1. Robert E. Kohn, 2001. "On Professor Kohn and Expected Utility: Correction and Clarification-Rejoinder," International Economic Journal, Taylor & Francis Journals, vol. 15(2), pages 57-62, June.

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