The Pitfalls of International Integration: A Comment on the Bush Proposal and Its Aftermath
In January 2003, the Bus Administration proposed a new system for taxing corporate dividends, under which domestic shareholders in U.S. corporations would not be taxed on dividends they received, provided the corporation distributed these dividends out of after-tax earnings (the "Bush Proposal"). The Bush Proposal was introduced in Congress in February 27,2003. Ultimately, however, Congress balked at enacting full-fledged dividend exemption. Instead, in the Jobs and Growth Tax Relief Reconciliation Act of 2003 ("JGTRRA") as enacted on May 28, 2003, a lower rate of 15% was adopted for dividends paid by domestic and certain foreign corporations, and the capital gains rate was likewise reduced to 15%. Significantly, and in stark contrast to the original Bush proposal, under JGTRRA the lower ate for dividends and capital gains does not depend on any tax being paid at the corporate level. This comment will focus primarily on the international aspects of both the Bush Proposal and JGTRRA. I will not lay out the proposal or the law in any detail. Instead, I will ask whether either the Bush Proposal or JGTRRA make sense from an economic efficiency perspective when the international implications are taken into account. I will leave to others the question of whether either the Bush Proposal or JGTRRA are sensible ways to stimulate the economy (for discussion for the effect of the 2001 tax cuts see Shapiro and Slemrod, 2001,2002). I will also omit ay discussion of the distributive effects of either the Bush Proposal or JGTRRA, which have been extensively discussed elsewhere (e.g. Tax Policy Center, 2003; Burman, Gale and Orszag, 2003
|Date of creation:|
|Contact details of provider:|| Web page: http://www.law.umich.edu/|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Homma, Masaaki, 1981. "A dynamic analysis of the differential incidence of capital and labour taxes in a two-class economy," Journal of Public Economics, Elsevier, vol. 15(3), pages 363-378, June.
- Casey B. Mulligan, 2002. "Capital Tax Incidence: First Impressions from the Time Series," NBER Working Papers 9374, National Bureau of Economic Research, Inc.
- Boadway, Robin & Bruce, Neil, 1992.
"Problems with integrating corporate and personal income taxes in an open economy,"
Journal of Public Economics,
Elsevier, vol. 48(1), pages 39-66, June.
- Robin Boadway & Neil Bruce, 1988. "Problems with Integrating Corporate and Personal Income Taxes in an Open Economy," Working Papers 735, Queen's University, Department of Economics.
- Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70, pages 215-215.
- Martin Feldstein, 1974. "Incidence of a Capital Income Tax in a Growing Economy with Variable Savings Rates," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 505-513.
- Gravelle, Jane G & Kotlikoff, Laurence J, 1989.
"The Incidence and Efficiency Costs of Corporate Taxation When Corporate and Noncorporate Firms Produce the Same Good,"
Journal of Political Economy,
University of Chicago Press, vol. 97(4), pages 749-780, August.
- Jane G. Gravelle & Laurence J. Kotlikoff, 1987. "The Incidence and Efficiency Costs of Corporate Taxation when Corporate and Noncorporate Firms Produce the Same Good," NBER Working Papers 2462, National Bureau of Economic Research, Inc.
- Mutti, John & Grubert, Harry, 1985. "The taxation of capital income in an open economy: the importance of resident-nonresident tax treatment," Journal of Public Economics, Elsevier, vol. 27(3), pages 291-309, August.
- Don Fullerton & Gilbert E. Metcalf, 2001.
Discussion Papers Series, Department of Economics, Tufts University
0106, Department of Economics, Tufts University.
- Don Fullerton & Gilbert E. Metcalf, 2002. "Tax Incidence," NBER Working Papers 8829, National Bureau of Economic Research, Inc.
- Gilbert E. Metcalf, 2006. "Tax Incidence," Discussion Papers Series, Department of Economics, Tufts University 0607, Department of Economics, Tufts University.
- Judd, Kenneth L., 1985.
"Redistributive taxation in a simple perfect foresight model,"
Journal of Public Economics,
Elsevier, vol. 28(1), pages 59-83, October.
- Kenneth L. Judd, 1982. "Redistributive Taxation in a Simple Perfect Foresight Model," Discussion Papers 572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Stiglitz, Joseph E., 1973. "Taxation, corporate financial policy, and the cost of capital," Journal of Public Economics, Elsevier, vol. 2(1), pages 1-34, February.
- Matthew D. Shapiro & Joel Slemrod, 2003.
"Consumer Response to Tax Rebates,"
American Economic Review,
American Economic Association, vol. 93(1), pages 381-396, March.
- Matthew D. Shapiro & Joel Slemrod, 2002.
"Did the 2001 Tax Rebate Stimulate Spending? Evidence from Taxpayer Surveys,"
NBER Working Papers
9308, National Bureau of Economic Research, Inc.
- Matthew D. Shapiro & Joel Slemrod, 2003. "Did the 2001 Tax Rebate Stimulate Spending? Evidence from Taxpayer Surveys," NBER Chapters, in: Tax Policy and the Economy, Volume 17, pages 83-110 National Bureau of Economic Research, Inc.
- Austan Goolsbee, 2002. "The Impact and Inefficiency of the Corporate Income Tax: Evidence from State Organizational Form Data," NBER Working Papers 9141, National Bureau of Economic Research, Inc.
- David F. Bradford, 1979.
"The Incidence and Allocation Effects of a Tax on Corporate Distributions,"
NBER Working Papers
0349, National Bureau of Economic Research, Inc.
- Bradford, David F., 1981. "The incidence and allocation effects of a tax on corporate distributions," Journal of Public Economics, Elsevier, vol. 15(1), pages 1-22, February.
- Grubert, Harry & Mutti, John, 1994. "International Aspects of Corporate Tax Integration: The Contrasting Role of Debt and Equity Flows," National Tax Journal, National Tax Association, vol. 47(1), pages 111-133, March.
- R. Grieson, 1972.
"The Incidence of Profits Taxes in a Neo-Classical Growth Model,"
83, Massachusetts Institute of Technology (MIT), Department of Economics.
- Grieson, Ronald E., 1975. "The incidence of profits taxes in a neo-classical growth model," Journal of Public Economics, Elsevier, vol. 4(1), pages 75-85, February.
- Desai, Mihir A. & Hines, James R. Jr., 2003. "Evaluating International Tax Reform," National Tax Journal, National Tax Association, vol. 56(3), pages 487-502, September.
- Clemens Fuest & Bernd Huber, 2000. "The Optimal Taxation of Dividends in a Small Open Economy," CESifo Working Paper Series 348, CESifo Group Munich.
- repec:ntj:journl:v:47:y:1994:i:no._1:p:111-33 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:bep:uomlwp:umichlwps-1007. 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: (Christopher F. Baum)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.