Incidence of Consumption Tax and Tax Treatment of Elderly Care Expenditures
This paper explores the differential incidence of consumption-tax policy in an overlapping generations model with a market-produced elderly care service. When a child cares about the welfare of his parents, the incidence depends on the tax treatment of care expenditure. If this expenditure is tax-free, capital accumulation increases so that the interest rate decreases. The young generation profits though it bears a heavier tax burden than the old. The opposite incidence is possible, too. The paper also examines whether or not these results continue to hold in an alternative model where the child cares about the home-produced service itself.
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Volume (Year): 54 (1999)
Issue (Month): 1-2 ()
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