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Capital Levies and Transition to a Consumption Tax

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  • Louis Kaplow

Abstract

The merits of capital levies depend on the likelihood of repetition, the extent of anticipation, and its effects on distribution. The relevance of these features, which in varying degrees is underdeveloped or underappreciated in pertinent literatures, is elaborated and then considered with regard to the problem of transition to a consumption tax. Other transition issues are distinguished, and specific attention is devoted to rate changes under a consumption tax and whether owners of preexisting capital are effectively compensated through higher net-of-tax returns due to repeal of the income tax. The analysis is also related to literature that examines dynamic models of taxation, particularly work simulating consumption tax transitions and assessing the optimality of capital taxation in the long run.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12259.

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Date of creation: May 2006
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Publication status: published as Auerbach, Alan J. and Daniel N. Shaviro (eds.) Institutional Foundations of Public Finance: Economic and Legal Perspectives. Cambridge and London: Harvard University Press, 2008.
Handle: RePEc:nbr:nberwo:12259

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  1. Alan J. Auerbach, 2006. "The Choice Between Income and Consumption Taxes: A Primer," NBER Working Papers 12307, National Bureau of Economic Research, Inc.
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  3. Louis Kaplow, 2003. "Transition Policy: A Conceptual Framework," NBER Working Papers 9596, National Bureau of Economic Research, Inc.
  4. Alan J. Auerbach & James R. Hines, Jr., 1987. "Anticipated Tax Changes and the Timing of Investment," NBER Chapters, in: Taxes and Capital Formation, pages 85-92 National Bureau of Economic Research, Inc.
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  24. Auerbach, Alan J. & Hines, James Jr., 2002. "Taxation and economic efficiency," Handbook of Public Economics, Elsevier, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 21, pages 1347-1421 Elsevier.
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  1. repec:reg:wpaper:4 is not listed on IDEAS
  2. David CASHIN & UNAYAMA Takashi, 2011. "The Intertemporal Substitution and Income Effects of a VAT Rate Increase: Evidence from Japan," Discussion papers 11045, Research Institute of Economy, Trade and Industry (RIETI).

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