Is Foreign-Owned Capital a Bad Thing to Tax?
AbstractThe aging population has raised at least two concerns about tax policy. First, taxes will need to be increased to cover higher public-pension and medical-care expenses when baby boomers have retired. Second, taxes can be cut in the meantime, as the government realizes the "fiscal dividend" that accompanies its debt reduction program (that has been motivated by the aging population development). This paper uses a simple endogenous growth analysis to examine these issues. It is assumed that sales tax increases are infeasible on political grounds. Two conclusions emerge: the income tax rate levied on domestic residents should be cut during the debt-reduction period, and the tax rate on foreigners whose capital is operating in Canada should be increased later on when the bulk of the baby boomers have retired.
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Bibliographic InfoPaper provided by McMaster University in its series Social and Economic Dimensions of an Aging Population Research Papers with number 214.
Length: 25 pages
Date of creation: Jun 2007
Date of revision:
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More information through EDIRC
fiscal policy; endogenous growth; open economy;
Find related papers by JEL classification:
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-ACC-2007-08-27 (Accounting & Auditing)
- NEP-ALL-2007-08-27 (All new papers)
- NEP-MAC-2007-08-27 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- N. Gregory Mankiw, 2000.
"The Savers-Spenders Theory of Fiscal Policy,"
NBER Working Papers
7571, National Bureau of Economic Research, Inc.
- N. Gregory Mankiw, 1999. "The Savers-Spenders Theory of Fiscal Policy," Harvard Institute of Economic Research Working Papers 1888, Harvard - Institute of Economic Research.
- Milbourne, Ross, 1995. "Economic Growth and Convergence in Open Economies," Australian Economic Papers, Wiley Blackwell, vol. 34(65), pages 309-21, December.
- J. B. Burbridge & W. M. Scarth, 1995. "Eliminating Interest Taxation and Tariffs: The Underpinnings for Recent Canadian Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 28(2), pages 437-49, May.
- repec:cup:macdyn:v:6:y:2002:i:2:p:307-35 is not listed on IDEAS
- Turnovsky, Stephen J., 2002. "Knife-Edge Conditions And The Macrodynamics Of Small Open Economies," Macroeconomic Dynamics, Cambridge University Press, vol. 6(02), pages 307-335, April.
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