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The Capital Levy in Theory and Practice


  • Eichengreen, Barry


This paper shows how in theory, if the contingencies in response to which it is imposed are fully anticipated, independently verifiable and not under government control, then saving and investment should not fall following the imposition of a capital levy. Nor should the government find it more difficult to raise revenues subsequently, even if its non-recurrence cannot be guaranteed. In practice, however, serious problems stand in the way of implementation. Property owners are sure to delay its adoption and engage in capital flight, reducing the prospective yield and allowing the special circumstances providing the justification for the levy to recede into the past.

Suggested Citation

  • Eichengreen, Barry, 1989. "The Capital Levy in Theory and Practice," CEPR Discussion Papers 350, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:350

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    References listed on IDEAS

    1. Henry Shavell, 1948. "Postwar Taxation in Japan," Journal of Political Economy, University of Chicago Press, vol. 56, pages 124-124.
    2. Thomas J. Sargent, 1982. "The Ends of Four Big Inflations," NBER Chapters,in: Inflation: Causes and Effects, pages 41-98 National Bureau of Economic Research, Inc.
    3. Grossman, Herschel I & Van Huyck, John B, 1988. "Sovereign Debt as a Contingent Claim: Excusable Default, Repudiation, and Reputation," American Economic Review, American Economic Association, vol. 78(5), pages 1088-1097, December.
    4. Chari, V V & Kehoe, Patrick J, 1990. "Sustainable Plans," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 783-802, August.
    5. V. V. Chari, 1988. "Time consistency and optimal policy design," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 17-31.
    6. Alberto Alesina, 1988. "Macroeconomics and Politics," NBER Chapters,in: NBER Macroeconomics Annual 1988, Volume 3, pages 13-62 National Bureau of Economic Research, Inc.
    7. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-396, March.
    8. Fischer, Stanley, 1980. "Dynamic inconsistency, cooperation and the benevolent dissembling government," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 93-107, May.
    9. Prescott, Edward C., 1977. "Should control theory be used for economic stabilization?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 7(1), pages 13-38, January.
    10. Herschel I. Grossman, 1988. "The Political Economy of War Debts and Inflation," NBER Working Papers 2743, National Bureau of Economic Research, Inc.
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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Why Wealth Taxes Are Not Enough
      by Kenneth Rogoff in Project Syndicate on 2013-11-04 21:51:59


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    Cited by:

    1. Giovannini, Alberto & Hines Jr, James R, 1990. "Capital Flight and Tax Competition: Are there Viable Solutions to Both Problems," CEPR Discussion Papers 416, C.E.P.R. Discussion Papers.
    2. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-1188, December.
    3. Michael D. Bordo & Pierre-Cyrille Hautcoeur, 2003. "Why didn't France follow the British Stabilization after World War One ?," DELTA Working Papers 2003-15, DELTA (Ecole normale supérieure).
    4. repec:eee:macchp:v2-2493 is not listed on IDEAS
    5. Louis Kaplow, 2006. "Capital Levies and Transition to a Consumption Tax," NBER Working Papers 12259, National Bureau of Economic Research, Inc.
    6. Nicolas Marceau & Michael Smart, 2000. "Business Tax Lobbying," Cahiers de recherche CREFE / CREFE Working Papers 102, CREFE, Université du Québec à Montréal.
    7. Mario Sarcinelli, 2012. "Euro crisis or public debt crisis? With a remedy for the latter case," PSL Quarterly Review, Economia civile, vol. 65(262), pages 215-236.
    8. repec:ifs:fistud:v:37:y:2016:i::p:821-849 is not listed on IDEAS


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