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The Marginal Excess Burden of Different Capital Tax Instruments

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  • Fullerton, Don
  • Henderson, Yolanda Kodrzycki

Abstract

Others have measured the addition to deadweight loss from an increase in an effective capital income tax rate, but there is no single way to raise such a rate. In the authors' general equilibrium model with multiple distortions in the allocation of real resources, they find that an increase in the statutory corporate income tax rate has the highest marginal excess burden, because it distorts intersectoral and interasset decisions as well as intertemporal decisions. An investment tax credit reduction has negative marginal excess burden because it raises revenue while reducing interasset distortions more than it increases intertemporal distortions. Copyright 1989 by MIT Press.

Suggested Citation

  • Fullerton, Don & Henderson, Yolanda Kodrzycki, 1989. "The Marginal Excess Burden of Different Capital Tax Instruments," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 435-442, August.
    • Handle: RePEc:tpr:restat:v:71:y:1989:i:3:p:435-42
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    1. Lemelin, André & Savard, Luc, 2022. "What do CGE models have to say about fiscal reform?," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 758-774.
    2. Becker, Jonathon & Schreiber, Andrew & McFarland, James, 2024. "The Welfare Consequences of Government Budget Closure Assumptions Under New Environmental Policies," National Center for Environmental Economics-NCEE Working Papers 348903, United States Environmental Protection Agency (EPA).
    3. Niels Johannesen, 2011. "Strategic Line Drawing between Debt and Equity," EPRU Working Paper Series 2011-04, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    4. Marten, Alex L. & Garbaccio, Richard & Wolverton, Ann, 2018. "Exploring the General Equilibrium Costs of Sector-Specific Environmental Regulations," National Center for Environmental Economics-NCEE Working Papers 280949, United States Environmental Protection Agency (EPA).
    5. Robert S. Chirinko, 2000. "Investment Tax Credits," CESifo Working Paper Series 243, CESifo.
    6. Mickael Beaud & Thierry Blayac & Patrice Bougette & Soufiane Khoudmi & Philippe Mahenc & Stéphane Mussard, 2013. "Estimation du coût d'opportunité des fonds publics pour l'économie française," Studies and Syntheses 14-01, LAMETA, Universtiy of Montpellier, revised Oct 2014.
    7. Claudio Agostini & Zareh Asatryan & Laurent Bach & Govindadeva Bernier & Marinho Bertanha & Katarzyna A. Bilicka & Anne Brockmeyer & Jaroslav Bukovina & Guillermo Falcone & Pablo Garriga & Yuxuan He &, 2026. "The Elasticity of Corporate Taxable Income Across Countries," NBER Working Papers 34945, National Bureau of Economic Research, Inc.
    8. David L. Weimer, 2002. "A better corporate tax?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 21(4), pages 693-696.
    9. Yunfa Zhu & Madanmohan Ghosh & Deming Luo & Nick Macaluso & Jacob Rattray, 2018. "Revenue Recycling And Cost Effective Ghg Abatement: An Exploratory Analysis Using A Global Multi-Sector Multi-Region Cge Model," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 9(01), pages 1-25, February.
    10. Ruud Mooij, 2005. "Will Corporate Income Taxation Survive?," De Economist, Springer, vol. 153(3), pages 277-301, September.
    11. Charles L. Ballard & Don Fullerton, 1992. "Distortionary Taxes and the Provision of Public Goods," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 117-131, Summer.
    12. Karpowicz Andrzej, 2018. "Corporate Income Tax Rates in the EU Member States: Why Lower Means Better," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 14(3), pages 32-48, September.
    13. Giuseppe Ruggieri, 1999. "The marginal cost of public funds in closed and small open economies," Fiscal Studies, Institute for Fiscal Studies, vol. 20(1), pages 41-60, March.
    14. Jason Nassios & John Madden & James Giesecke & Janine Dixon & Nhi Tran & Peter Dixon & Maureen Rimmer & Philip Adams & John Freebairn, 2019. "The economic impact and efficiency of state and federal taxes in Australia," Centre of Policy Studies/IMPACT Centre Working Papers g-289, Victoria University, Centre of Policy Studies/IMPACT Centre.
    15. Tran, Chung & Wende, Sebastian, 2021. "On the marginal excess burden of taxation in an overlapping generations model," Journal of Macroeconomics, Elsevier, vol. 70(C).
    16. Peter Birch Sørensen, 2011. "Measuring the Deadweight Loss from Taxation in a Small Open Economy. A general method with an application to Sweden," EPRU Working Paper Series 2011-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    17. Janine M. Dixon & Jason Nassios, 2018. "A Dynamic Economy-wide Analysis of Company Tax Cuts in Australia," Centre of Policy Studies/IMPACT Centre Working Papers g-287, Victoria University, Centre of Policy Studies/IMPACT Centre.

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