Household-specific growth rates of the tax base imply that the timing of tax collections determines the distribution of tax burdens and wealth across households. Changes in financial policy do not only shift taxes across generations, but also within cohorts. Institutional deficit constraints settle tax shifting conflicts in favor of individuals with high income growth. With distortionary taxes, policy makers trade off the wealth effects of financial policy and the efficiency cost of household-specific deadweight burdens. I apply the incidence analysis of financial policy to two examples: The financing of the German unification, and the timing of tax collections over the U.S. business cycle.
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Paper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number
711.
Length: 30 pages Date of creation: 16 May 2002 Date of revision: Publication status: Published in Review of Economic Dynamics, 2004, pages 27-51. Handle: RePEc:hhs:iiessp:0711
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Find related papers by JEL classification: E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management
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