Advanced Search
MyIDEAS: Login to save this paper or follow this series

Tax Neutrality in the King-Fullerton Framework, Investment Externalities, and Growth

Contents:

Author Info

  • Massimo FLORIO

    ()

Abstract

The King-Fullerton (1984) approach to the measurement of effective marginal rates of taxation on capital income has been applied extensively. The empirical literature confirms that the dispersion of effective tax rates, both within each country and among countries, is wide. However no test has been proposed of the impact on investment of these findings. The paper tests the conjecture proposed by King and Fullerton that standard deviation of effective tax wedges and investment or growth are inversely correlated. We find that international evidence does not support the conjecture: while investment and tax wedges are negatively correlated, as expected, the standard deviation of tax wedges seems to be positively correlated to investment. We propose the following interpretation of this result: a substantial part of the variance of effective marginal rates is explained by an implicit subsidy to equipment investment, and this policy may be justified by De Long-Summers (1992) results or by the view that this type of investment have more impact on growth than other types (such as buildings and inventories). In some cases also a partial deduction of interest rates may be rational when capital markets are rationed. Thus it may be simplistic and misleading to use King- Fullerton statistics as yardsticks for tax reforms leading to uniformity of effective marginal tax rates.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://wp.demm.unimi.it/tl_files/wp/1995/DEMM-1995_009wp.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 1995-09.

as in new window
Length:
Date of creation: 01 Jan 1995
Date of revision: 15 May 2007
Handle: RePEc:mil:wpdepa:1995-09

Contact details of provider:
Postal: Via Conservatorio 7, I-20122 Milan - Italy
Phone: +39 02 50321522
Fax: +39 02 50321505
Web page: http://www.demm.unimi.it
More information through EDIRC

Related research

Keywords: capital income taxation; King-Fullerton framework; tax neutrality and growth;

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Giuseppe Bognetti, 1999. "Nuove forme di gestione dei servizi pubblici," Departmental Working Papers 1999-04, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  2. Massimo Florio & Anna Giunta, 1998. "Planning Contracts in Southern Italy, 1986-1997: a Prelimary Evaluation," Departmental Working Papers 1998-04, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:mil:wpdepa:1995-09. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (DEMM Working Papers) The email address of this maintainer does not seem to be valid anymore. Please ask DEMM Working Papers to update the entry or send us the correct address.

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.