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Decomposing the Welfare Costs of Capital Tax Distortions: The Importance of Risk Assumptions

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Author Info
Bob Hamilton
Jack Mintz
John Whalley

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Abstract

This paper analyzes the implications of alterative risk assumptions for estimates of the distorting effects of the corporate tax in Canada. These distortions are decomposed into three broad categories: inter-asset distortions; inter-industry distortions; and inter-temporal distortions. Estimates of marginal effective corporate tax rates are used in a multi-asset general equilibrium model to evaluate the costs of the various distortions, with marginal effective tax rates calculated under alterative risk assumptions. Results indicate that assessments of the relative importance of these distortions are sensitive to alterative risk assumptions used in marginal tax rate calculations. The paper also explores the sensitivity of results to key elasticity parameters in the model.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3628.

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Date of creation: Feb 1991
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Handle: RePEc:nbr:nberwo:3628

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References listed on IDEAS
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.:
  1. Alan J. Auerbach, 1983. "Corporate Taxation in the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(1983-2), pages 451-514. [Downloadable!]
  2. Robin, et al Boadway, 1987. "Marginal Effective Tax Rates for Capital in the Canadian Mining Industry," Canadian Journal of Economics, Canadian Economics Association, vol. 20(1), pages 1-16, February. [Downloadable!] (restricted)
  3. Hamilton, Bob & Whalley, John, 1985. "Tax treatment of housing in a dynamic sequenced general equilibrium model," Journal of Public Economics, Elsevier, vol. 27(2), pages 157-175, July. [Downloadable!] (restricted)
  4. Mintz, Jack M, 1988. "An Empirical Estimate of Corporate Tax Refundability and Effective Tax Rates," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 225-31, February. [Downloadable!] (restricted)
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  5. Robin Boadway & Neil Bruce & Jack Mintz, 1984. "Taxation, Inflation, and the Effective Marginal Tax Rate on Capital in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 17(1), pages 62-79, February. [Downloadable!] (restricted)
  6. Jeremy I. Bulow & Lawrence H. Summers, 1984. "The Taxation of Risky Assets," NBER Working Papers 0897, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Gordon, Roger H, 1985. "Taxation of Corporate Capital Income: Tax Revenues versus Tax Distortions," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 1-27, February.
  8. Michael J. Daly & Jack Jung, 1987. "The Taxation of Corporate Investment Income in Canada: An Analysis of Marginal Effective Tax Rates," Canadian Journal of Economics, Canadian Economics Association, vol. 20(3), pages 555-87, August. [Downloadable!] (restricted)
  9. Gordon, Roger H & Wilson, John Douglas, 1989. "Measuring the Efficiency Cost of Taxing Risky Capital Income," American Economic Review, American Economic Association, vol. 79(3), pages 427-39, June. [Downloadable!] (restricted)
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  1. Duanjie Chen & Jack M. Mintz, 2008. "Limited Horizons: The 2008 Report on Federal and Provincial Budgetary Tax Policies," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 270, July. [Downloadable!]
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