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Growth effects of a flat tax

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  • Steven P. Cassou
  • Kevin J. Lansing

Abstract

A presentation of a quantitative general equilibrium model showing that a revenue-neutral flat tax can permanently boost per capita growth by 0.18 to 0.85 percentage point annually, and that the lower marginal tax rate and the full investment write-off are both important contributors to the increased growth.

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File URL: http://www.clevelandfed.org/research/workpaper/1996/wp9615.pdf
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Bibliographic Info

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 9615.

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Date of creation: 1996
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Handle: RePEc:fip:fedcwp:9615

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Keywords: Flat-rate income tax ; Taxation ; Economic conditions - United States;

References

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  1. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
  2. Michael B. Devereux & David R. F. Love, 1994. "The Effects of Factor Taxation in a Two-Sector Model of Endogenous Growth," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 27(3), pages 509-36, August.
  3. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  4. Robert G. King & Sergio Rebelo, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," NBER Working Papers 3338, National Bureau of Economic Research, Inc.
  5. Lucas, Robert E, Jr & Prescott, Edward C, 1971. "Investment Under Uncertainty," Econometrica, Econometric Society, Econometric Society, vol. 39(5), pages 659-81, September.
  6. Gian Maria Milesi-Ferrett & Nouriel Roubini, 1995. "Growth Effects of Income and Consumption Taxes: Positive and Normative Analysis," NBER Working Papers 5317, National Bureau of Economic Research, Inc.
  7. Steven P. Cassou & Kevin J. Lansing, 1995. "Optimal fiscal policy, public capital, and the productivity slowdown," Working Paper 9509, Federal Reserve Bank of Cleveland.
  8. David Altig & Charles T. Carlstrom, 1995. "Marginal tax rates and income inequality: a quantitative-theoretic analysis," Working Paper 9508, Federal Reserve Bank of Cleveland.
  9. Casey B. Mulligan, . "The Intertemporal Substitution of Work--What Does the Evidence Say?," University of Chicago - Population Research Center, Chicago - Population Research Center 95-11, Chicago - Population Research Center.
  10. Stokey, Nancy L & Rebelo, Sergio, 1995. "Growth Effects of Flat-Rate Taxes," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(3), pages 519-50, June.
  11. Kei-Mu Yi & Narayana R. Kocherlakota, 1996. "Is there endogenous long-run growth?: Evidence from the U.S. and the U.K," Staff Reports, Federal Reserve Bank of New York 17, Federal Reserve Bank of New York.
  12. Pecorino, Paul, 1993. "Tax structure and growth in a model with human capital," Journal of Public Economics, Elsevier, Elsevier, vol. 52(2), pages 251-271, September.
  13. Gerhard Glomm & B. Ravikumar, 1998. "Flat-Rate Taxes, Government Spending on Education, and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 306-325, January.
  14. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(3), pages 485-517, June.
  15. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, American Economic Association, vol. 78(3), pages 402-17, June.
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Cited by:
  1. Fehr, Hans, 1999. "Welfare Effects of Dynamic Tax Reforms," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, edition 1, volume 5, number urn:isbn:9783161470165, July.
  2. Elizabeth M. Caucutt & Selahattin Imrohoroglu & Krishna B. Kumar, 2000. "Does the progressivity of taxes matter for economic growth?," Discussion Paper / Institute for Empirical Macroeconomics, Federal Reserve Bank of Minneapolis 138, Federal Reserve Bank of Minneapolis.
  3. Gregory W. Huffman & Evan F. Koenig, 1998. "The dynamic impact of fundamental tax reform part 2 : extensions," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, Federal Reserve Bank of Dallas, issue Q II, pages 1.
  4. Luigi, Bernardi, 2003. "Tax systems and tax reforms in Europe: Rationale and open issue for more radical reforms," MPRA Paper 18041, University Library of Munich, Germany.
  5. Jan-Ting Guo & Kevin J. Lansing, 1997. "Tax structure and welfare in a model of optimal fiscal policy," Economic Review, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, issue Q I, pages 11-23.

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