Is Foreign-Owned Capital a Bad Thing to Tax?
The aging population has raised at least two concerns about tax policy. First, taxes will need to be increased to cover higher public-pension and medical-care expenses when baby boomers have retired. Second, taxes can be cut in the meantime, as the government realizes the "fiscal dividend" that accompanies its debt reduction program (that has been motivated by the aging population development). This paper uses a simple endogenous growth analysis to examine these issues. It is assumed that sales tax increases are infeasible on political grounds. Two conclusions emerge: the income tax rate levied on domestic residents should be cut during the debt-reduction period, and the tax rate on foreigners whose capital is operating in Canada should be increased later on when the bulk of the baby boomers have retired.
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- N. Gregory Mankiw, 2000.
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NBER Working Papers
7571, National Bureau of Economic Research, Inc.
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0031, Department of Economics at the University of Washington.
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- repec:cup:macdyn:v:6:y:2002:i:2:p:307-35 is not listed on IDEAS
- Milbourne, Ross, 1995. "Economic Growth and Convergence in Open Economies," Australian Economic Papers, Wiley Blackwell, vol. 34(65), pages 309-21, December.
- Turnovsky, Stephen J., 2002. "Knife-Edge Conditions And The Macrodynamics Of Small Open Economies," Macroeconomic Dynamics, Cambridge University Press, vol. 6(02), pages 307-335, April.
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