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Capital Gains Tax Cuts, Investment, and Growth

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  • Steven M. Fazzari

    (The Jerome Levy Economics Institute)

  • Benjamin Herzon

    (The Jerome Levy Economics Institute)

Abstract

Congress currently is considering changes in the capital gains tax, including reducing the rate, indexing the rate to inflation, or some combination of reduction and indexing. These changes have been advocated on the grounds that a cut in the rate will stimulate investment and economic growth. In this working paper, Research Associate Steven M. Fazzari and Benjamin Herzon, a doctoral candidate at Washington University, present a theoretical analysis of the effect of a tax cut on the cost of capital, investment, and output.

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File URL: http://128.118.178.162/eps/mac/papers/9811/9811006.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 9811006.

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Length: 41 pages
Date of creation: 19 Nov 1998
Date of revision:
Handle: RePEc:wpa:wuwpma:9811006

Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 41; figures: included
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Web page: http://128.118.178.162

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  1. Martin Feldstein & Lawrence H. Summers, 1979. "Inflation and the Taxation of Capital Income in the Corporate Sector," NBER Working Papers 0312, National Bureau of Economic Research, Inc.
  2. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-46, April.
  3. James M. Poterba, 1989. "Venture Capital and Capital Gains Taxation," NBER Chapters, in: Tax Policy and the Economy, Volume 3, pages 47-68 National Bureau of Economic Research, Inc.
  4. Jonathan Skinner & Daniel Feenberg, 1990. "The Impact of the 1986 Tax Reform Act on Personal Saving," NBER Working Papers 3257, National Bureau of Economic Research, Inc.
  5. Steven M. Fazzari & Anna Maria Variato, 1994. "Asymmetric Information and Keynesian Theories of Investment," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 16(3), pages 351-369, April.
  6. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
  7. Laurence H. Meyer & Joel L. Prakken & Chris P. Varvares, 1993. "Policy Watch: Designing an Effective Investment Tax Credit," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 189-196, Spring.
  8. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  9. Robert S. Chirinko, 1992. "Business Fixed Investment Spending: A Critical survey of Modeling Strategies, Empirical Results, and Policy Implications," Working Papers 9213, Harris School of Public Policy Studies, University of Chicago.
  10. Yolanda K. Henderson, 1986. "Lessons from federal reform of business taxes," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 9-25.
  11. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-57, April.
  12. Martin Feldstein & James M. Poterba & Louis Dicks-Mireaux, 1981. "The Effective Tax Rate and the Pretax Rate of Return," NBER Working Papers 0740, National Bureau of Economic Research, Inc.
  13. Alan J. Auerbach, 1982. "Taxation, Corporate Financial Policy and the Cost of Capital," NBER Working Papers 1026, National Bureau of Economic Research, Inc.
  14. Fullerton, Don, et al, 1981. "Corporate Tax Integration in the United States: A General Equilibrium Approach," American Economic Review, American Economic Association, vol. 71(4), pages 677-91, September.
  15. Joseph J. Minarik, 1992. "Capital Gains Taxation, Growth, And Fairness," Contemporary Economic Policy, Western Economic Association International, vol. 10(3), pages 16-25, 07.
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Cited by:
  1. Robert S. Chirinko & Steven M. Fazzari & Andrew P. Meyer, 1996. "What Do Micro Data Reveal About the User Cost Elasticity?: New Evidence on the Responsiveness of Business Capital Formation," Economics Working Paper Archive wp_175, Levy Economics Institute.
  2. Michael Hudson & Kris Feder, 1997. "Real Estate and the Capital Gains Debate," Economics Working Paper Archive wp_187, Levy Economics Institute.
  3. Michael Hudson & Kris Feder, . "What's Missing from the Capital Gains Debate? Real Estate and Capital Gains Taxation," Economics Public Policy Brief Archive ppb_32, Levy Economics Institute.

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