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The Johansson-Samuelson Theorem in General Equilibrium: A Rebuttal

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  • Francesco Menoncin
  • Paolo Panteghini

Abstract

The well-known Johansson-Samuelson Theorem proves that, in partial equilibrium, comprehensive income taxation with a uniform tax rate is neutral in terms of investment decisions, if fiscal depreciation allowances coincide with economic depreciation. In this article we show that this result does not hold in general equilibrium, unless fairly restrictive conditions are met.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2008/wp-cesifo-2008-07/cesifo1_wp2352.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2352.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2352

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Keywords: general equilibrium; investment neutrality; uniform taxation;

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  1. Gordon, Roger H, 1985. "Taxation of Corporate Capital Income: Tax Revenues versus Tax Distortions," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 1-27, February.
  2. Darrell Duffie & William Zame, 1988. "The Consumption-Based Capital Asset Pricing Model," Discussion Papers 88-10, University of Copenhagen. Department of Economics.
  3. Patrick K. Asea & Stephen J. Turnovsky, 1997. "Capital Income Taxation and Risk-Taking in a Small Open Economy," NBER Working Papers 6189, National Bureau of Economic Research, Inc.
  4. Paul A. Samuelson, 1964. "Tax Deductibility of Economic Depreciation to Insure Invariant Valuations," Journal of Political Economy, University of Chicago Press, vol. 72, pages 604.
  5. Jeremy I. Bulow & Lawrence H. Summers, 1984. "The Taxation of Risky Assets," NBER Working Papers 0897, National Bureau of Economic Research, Inc.
  6. Michael P. Devereux, 2003. "Measuring Taxes on Income from Capital," CESifo Working Paper Series 962, CESifo Group Munich.
  7. Sergio T. Rebelo, 1992. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
  8. Gomes, Joao F & Kogan, Leonid & Zhang, Lu, 2002. "Equilibrium Cross-Section of Returns," CEPR Discussion Papers 3482, C.E.P.R. Discussion Papers.
  9. Robin Boadway & Neil Bruce, 1982. "A General Proposition on the Design of a Neutral Business Tax," Working Papers 461, Queen's University, Department of Economics.
  10. Andrew B. Abel, 2007. "Optimal Capital Income Taxation," NBER Working Papers 13354, National Bureau of Economic Research, Inc.
  11. Hartwick, John M. & Karp, Larry & Long, Ngo Van, 2002. "Depreciation rules and value invariance with extractive firms," Journal of Economic Dynamics and Control, Elsevier, vol. 26(1), pages 99-116, January.
  12. Vasicek, Oldrich Alfons, 2005. "The economics of interest rates," Journal of Financial Economics, Elsevier, vol. 76(2), pages 293-307, May.
  13. Fane, G., 1987. "Neutral taxation under uncertainty," Journal of Public Economics, Elsevier, vol. 33(1), pages 95-105, June.
  14. Rainer Niemann, 2004. "Tax Rate Uncertainty, Investment Decisions, and Tax Neutrality," International Tax and Public Finance, Springer, vol. 11(3), pages 265-281, 05.
  15. Kaplow, Louis, 1994. "Taxation and Risk Taking: A General Equilibrium Perspective," National Tax Journal, National Tax Association, vol. 47(4), pages 789-98, December.
  16. Louis Kaplow, 1995. "Taxation and Risk Taking: A General Equilibrium Perspective," NBER Working Papers 3709, National Bureau of Economic Research, Inc.
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Cited by:
  1. Alessandro Fedele & Raffaele Miniaci, 2010. "Do Social Enterprises Finance Their Investments Differently from For-profit Firms? The Case of Social Residential Services in Italy," Journal of Social Entrepreneurship, Taylor & Francis Journals, vol. 1(2), pages 174-189, October.
  2. Alessandro Fedele & Paolo Panteghini & Sergio Vergalli, 2009. "Optimal investment and financial strategies under tax rate uncertainty," Working Papers 0912, University of Brescia, Department of Economics.
  3. Del Boca, Alessandra & Fratianni, Michele & Spinelli, Franco & Trecroci, Carmine, 2010. "The Phillips curve and the Italian lira, 1861-1998," The North American Journal of Economics and Finance, Elsevier, vol. 21(2), pages 182-197, August.
  4. Monica Billio & Roberto Casarin, 2010. "Bayesian Estimation of Stochastic-Transition Markov-Switching Models for Business Cycle Analysis," Working Papers 1002, University of Brescia, Department of Economics.
  5. Francesco Menoncin & Paolo Panteghini, 2009. "Retrospective Capital Gains taxation in the real world," Working Papers 0910, University of Brescia, Department of Economics.
  6. Alberto Bisin & John Geanakoplos & Piero Gottardi & Enrico Minelli & Heracles Polemarchakis, 2009. "Markets and Contracts," Working Papers 0915, University of Brescia, Department of Economics.
  7. Martin Meier & Enrico Minelli & Herakles Polemarchakis, 2009. "Competitive Markets with Private Information on Both Sides," Working Papers 0917, University of Brescia, Department of Economics.
  8. Rosella Levaggi & Francesco Menoncin, 2009. "Decentralized provision of merit and impure public goods," Working Papers 0909, University of Brescia, Department of Economics.
  9. Alessandro Fedele & Francesco Liucci & Andrea Mantovani, 2009. "Credit availability in the crisis: the European investment bank group," Working Papers 0913, University of Brescia, Department of Economics.

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