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Simulating U.S. Business Cash Flow Taxation in a 17-Region Global Model

Author

Listed:
  • Seth G. Benzell

    (Boston University and MIT Initiative on the Digital Economy)

  • Laurence J. Kotlikoff

    (Boston University, The Gaidar Institute for Economic Policy, and NBER)

  • Guillermo Lagarda

    (Boston University and Inter-American Development Bank)

  • Yifan Ye

    (Boston University)

Abstract

This paper uses the Global Gaidar Model to simulate replacing a territorial corporate income tax with a wealth tax imposed in the form of a destination-based Business Cash Flow Tax. According to the model, the reform produces, over a decade, increases in the capital stock, GDP, and pre-tax wages for high- and low-skilled workers of 20.5 percent, 6.8 percent, 6.3 and 7.5 percent, respectively. Young workers benefit greatly from the change, and welfare loss for retirees is limited. The initially revenue neutral tax reform raises enough additional revenue over time to permit a reduction in personal income tax rates.

Suggested Citation

  • Seth G. Benzell & Laurence J. Kotlikoff & Guillermo Lagarda & Yifan Ye, 2018. "Simulating U.S. Business Cash Flow Taxation in a 17-Region Global Model," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-312, Boston University - Department of Economics.
    • Handle: RePEc:bos:iedwpr:dp-312
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    References listed on IDEAS

    as
    1. Hans Fehr & Sabine Jokisch & Ashwin Kambhampati & Laurence J. Kotlikoff, 2013. "Simulating the Elimination of the U.S. Corporate Income Tax," NBER Working Papers 19757, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Corporate Tax Reform; House Tax Plan; Economic Growth; Business Cash Flow Tax; Computable General Equilibrium; wealth taxation;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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