A Reexamination of Tax Distortions in General Equilibrium Models
General equilibrium models have recently been used to simulate the effects of many proposed tax changes. However, in modeling the effects of the government on the economy, these models have assumed for simplicity that marginal tax rates equal the observed average tax rates, and that marginal benefit rates are zero. The main purpose of this paper is to derive improved estimates of various marginal tax and benefit rates. Most importantly, we include in the model recent theories concerning the effects of combined corporate and personal taxes on corporate financial and investment decisions. The conclusions previously derived concerning the effects of corporate tax integration are then reexamined in light of the proposed changes.
|Date of creation:||May 1981|
|Date of revision:|
|Publication status:||published as Fullerton, Don and Gordon, Roger H. "A Reexamination of Tax Distortions in General Equilibrium Models." Behavioral Simulation Methods in Tax Policy Analysis, edited by Martin Feldstein. Chicago: University of Chicago Press, (1983), pp. 369-462.|
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