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The Johansson-Samuelson Theorem in General Equilibrium: A Rebuttal

  • Francesco Menoncin
  • Paolo Panteghini

The well-known Johansson-Samuelson Theorem proves that, in partial equilibrium, comprehensive income taxation with a uniform tax rate is neutral in terms of investment decisions, if fiscal depreciation allowances coincide with economic depreciation. In this article we show that this result does not hold in general equilibrium, unless fairly restrictive conditions are met.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2352.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2352
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  1. Fane, G., 1987. "Neutral taxation under uncertainty," Journal of Public Economics, Elsevier, vol. 33(1), pages 95-105, June.
  2. Boadway, Robin & Bruce, Neil, 1984. "A general proposition on the design of a neutral business tax," Journal of Public Economics, Elsevier, vol. 24(2), pages 231-239, July.
  3. Vasicek, Oldrich Alfons, 2005. "The economics of interest rates," Journal of Financial Economics, Elsevier, vol. 76(2), pages 293-307, May.
  4. Gordon, Roger H, 1985. "Taxation of Corporate Capital Income: Tax Revenues versus Tax Distortions," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 1-27, February.
  5. Paul A. Samuelson, 1964. "Tax Deductibility of Economic Depreciation to Insure Invariant Valuations," Journal of Political Economy, University of Chicago Press, vol. 72, pages 604.
  6. Duffie, Darrell & Zame, William, 1989. "The Consumption-Based Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 57(6), pages 1279-97, November.
  7. Louis Kaplow, 1991. "Taxation and Risk Taking: A General Equilibrium Perspective," NBER Working Papers 3709, National Bureau of Economic Research, Inc.
  8. Rainer Niemann, 2004. "Tax Rate Uncertainty, Investment Decisions, and Tax Neutrality," International Tax and Public Finance, Springer, vol. 11(3), pages 265-281, 05.
  9. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  10. Michael P. Devereux, 2003. "Measuring Taxes on Income from Capital," CESifo Working Paper Series 962, CESifo Group Munich.
  11. Bulow, Jeremy I & Summers, Lawrence H, 1984. "The Taxation of Risky Assets," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 20-39, February.
  12. Hartwick, John M. & Karp, Larry & Long, Ngo Van, 2002. "Depreciation rules and value invariance with extractive firms," Journal of Economic Dynamics and Control, Elsevier, vol. 26(1), pages 99-116, January.
  13. Patrick Asea & Stephen Turnovsky, 1997. "Capital Income Taxation and Risk-Taking in a Small Open Economy," UCLA Economics Working Papers 768, UCLA Department of Economics.
  14. Kaplow, Louis, 1994. "Taxation and Risk Taking: A General Equilibrium Perspective," National Tax Journal, National Tax Association, vol. 47(4), pages 789-98, December.
  15. Gomes, Joao F & Kogan, Leonid & Zhang, Lu, 2002. "Equilibrium Cross-Section of Returns," CEPR Discussion Papers 3482, C.E.P.R. Discussion Papers.
  16. Andrew B. Abel, 2007. "Optimal Capital Income Taxation," NBER Working Papers 13354, National Bureau of Economic Research, Inc.
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