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The Design of Capital Income Taxation: Reflections on the Mirrlees Review

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  • Keuschnigg, Christian

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Abstract

This commentary reflects on the recommendations of the Mirrlees Review on tax reform with a special focus on capital income taxation. Regarding the alternatives of moving to a consumption based tax system, the commentary discusses the relative merits of choosing an ACE system (allowance for corporate equity) rather than a cash-flow tax on the company level. It reviews the arguments in favour of full elimination of tax on the normal return to savings at the personal level which contrasts with alternative tax reform proposals recommending a positive but low and flat tax rate on personal capital income. It also discusses how existing computational models would have to be extended for a meaningful quantification of the gains and costs of implementing a tax reform along the lines of the Mirrlees Review.

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File URL: http://www1.vwa.unisg.ch/RePEc/usg/econwp/EWP-1129.pdf
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Bibliographic Info

Paper provided by University of St. Gallen, School of Economics and Political Science in its series Economics Working Paper Series with number 1129.

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Length: 19 pages
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:usg:econwp:2011:29

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Keywords: Fundamental tax reform; consumption based tax system;

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  1. Robin Boadway & Neil Bruce, 1982. "A General Proposition on the Design of a Neutral Business Tax," Working Papers 461, Queen's University, Department of Economics.
  2. Ruud A. de Mooij & Sjef Ederveen, 2008. "Corporate tax elasticities: a reader's guide to empirical findings," Oxford Review of Economic Policy, Oxford University Press, vol. 24(4), pages 680-697, winter.
  3. Bonds, Stephen R. & Devereux, Michael P., 1995. "On the design of a neutral business tax under uncertainty," Journal of Public Economics, Elsevier, vol. 58(1), pages 57-71, September.
  4. Peter Sørensen, 2005. "Neutral Taxation of Shareholder Income," International Tax and Public Finance, Springer, vol. 12(6), pages 777-801, November.
  5. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR & CES & MSH, vol. 17(35), pages 449-495, October.
  6. Martin D. Dietz & Christian Keuschnigg, 2005. "A Growth Oriented Dual Income Tax," CESifo Working Paper Series 1513, CESifo Group Munich.
  7. David Altig, 2001. "Simulating Fundamental Tax Reform in the United States," American Economic Review, American Economic Association, vol. 91(3), pages 574-595, June.
  8. Christian Keuschnigg & Mirela Keuschnigg, 2010. "Transition Strategies in Fundamental Tax Reform," University of St. Gallen Department of Economics working paper series 2010 2010-10, Department of Economics, University of St. Gallen.
  9. Feldstein, Martin, 1976. "On the theory of tax reform," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 77-104.
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Cited by:
  1. Richard Ochmann, 2014. "Differential income taxation and household asset allocation," Applied Economics, Taylor & Francis Journals, vol. 46(8), pages 880-894, March.

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