IDEAS home Printed from https://ideas.repec.org/a/fip/fedder/y2001iqiip20-31.html
   My bibliography  Save this article

The transition to consumption taxation, Part 2: the impact on existing financial assets

Author

Listed:
  • Alan D. Viard

Abstract

Replacing the income tax with a consumption tax is likely to reduce the total value of the capital stock. Alan D. Viard reviews how this decline is divided between bondholders and stockholders and the effect on household borrowers and lenders. He explains that the results depend on whether monetary policy accommodates the tax through a higher price level. Without accommodation, the decline in the value of capital is largely borne by stockholders and there is little reallocation of wealth between household borrowers and lenders. If the tax is fully accommodated, bondholders bear heavier burdens than stockholders and household borrowers gain at the expense of the household lenders.

Suggested Citation

  • Alan D. Viard, 2001. "The transition to consumption taxation, Part 2: the impact on existing financial assets," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q II, pages 20-31.
  • Handle: RePEc:fip:fedder:y:2001:i:qii:p:20-31
    as

    Download full text from publisher

    File URL: http://www.dallasfed.org/assets/documents/research/efr/2001/efr0102c.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Taylor, John B., 1999. "Staggered price and wage setting in macroeconomics," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 15, pages 1009-1050 Elsevier.
    2. Evan F. Koenig & Gregory W. Huffman, 1998. "The dynamic impact of fundamental tax reform part 1: the basic model," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q 1, pages 24-37.
    3. Alan D. Viard, 2000. "The transition to consumption taxation, part 1: the impact on existing capital," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q3, pages 2-22.
    4. Gregory W. Huffman & Evan F. Koenig, 1998. "The dynamic impact of fundamental tax reform part 2 : extensions," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q II, pages 1-1.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Taxation ; Stocks ; Monetary policy ; Wealth;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedder:y:2001:i:qii:p:20-31. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Chapman). General contact details of provider: http://edirc.repec.org/data/frbdaus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.