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Gradual Reforms of Capital Income Taxation

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  • Peter Howitt
  • Hans-Werner Sinn

Abstract

This paper analyzes the intertemporal allocation effects of anticipated tax rate changes, reconsidering the recommendations of the Meade Committee in a perfect foresight general equilibrium model of economic growth. It is shown that the R-base (or consumption) tax can be more distortionary than an income tax and that a revenue-neutral integration of corporate and personal taxation will lower social welfare. Moreover, it is argued that a dividend tax dominates the R-base tax because it places its distortions on the financial, rather than on the real, side of the economy. Copyright 1989 by American Economic Association.
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Suggested Citation

  • Peter Howitt & Hans-Werner Sinn, 1986. "Gradual Reforms of Capital Income Taxation," University of Western Ontario, Departmental Research Report Series 8609, University of Western Ontario, Department of Economics.
    • Handle: RePEc:uwo:uwowop:8609
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    File URL: https://ir.lib.uwo.ca/cgi/viewcontent.cgi?article=1665&context=economicsresrpt
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    Cited by:

    1. Siemers, Lars-H. R. & Zöller, Daniel, 2006. "Das Übergangsmodell der Einfachsteuer: Eine Effiziente Unternehmensbesteuerung?," MPRA Paper 757, University Library of Munich, Germany.
    2. Hans-Werner Sinn, 1997. "The Value of Children and Immigrants in a Pay-As-You-Go Pension System: A Proposal for a Partial Transition to a Funded System," NBER Working Papers 6229, National Bureau of Economic Research, Inc.
    3. Andreas Haufler & Søren Nielsen, 1997. "Dynamic effects of an anticipated switch from destination- to origin-based commodity taxation," Journal of Economics, Springer, vol. 66(1), pages 43-69, February.
    4. Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(4), pages 360-394, August.
    5. David F. Bradford, 1998. "Transition to and Tax-Rate Flexibility in a Cash-Flow-Type Tax," NBER Chapters, in: Tax Policy and the Economy, Volume 12, pages 151-172, National Bureau of Economic Research, Inc.
    6. Hans-Werner Sinn, 1991. "Taxation and the Cost of Capital: The "Old" View, the "New" View, and Another View," NBER Chapters, in: Tax Policy and the Economy, Volume 5, pages 25-54, National Bureau of Economic Research, Inc.
    7. Louis Kaplow, 2006. "Capital Levies and Transition to a Consumption Tax," NBER Working Papers 12259, National Bureau of Economic Research, Inc.
    8. Sinn, Hans-Werner, 1998. "European Integration and the Future of the Welfare State," CEPR Discussion Papers 1871, C.E.P.R. Discussion Papers.
    9. Strulik, Holger & Trimborn, Timo, 2010. "Anticipated tax reforms and temporary tax cuts: A general equilibrium analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 34(10), pages 2141-2158, October.
    10. Hans-Werner Sinn, 1990. "Taxation and the Birth of Foreign Subsidiaries," NBER Working Papers 3519, National Bureau of Economic Research, Inc.
    11. Hans-Werner Sinn, 2007. "Public Policies against Global Warming," CESifo Working Paper Series 2087, CESifo.
    12. Trimborn, Timo, 2007. "Anticipated Shocks in Continuous-time Optimization Models: Theoretical Investigation and Numerical Solution," Hannover Economic Papers (HEP) dp-363, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    13. David Bradford, "undated". "Consumption Taxes: Some Fundamental Transition Issues," EPRU Working Paper Series 95-15, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    14. Bilicka, Katarzyna, 2020. "Are financing constraints binding for investment? Evidence from a natural experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 618-640.
    15. Hartwick, John M. & Karp, Larry & Long, Ngo Van, 2002. "Depreciation rules and value invariance with extractive firms," Journal of Economic Dynamics and Control, Elsevier, vol. 26(1), pages 99-116, January.

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