Tax Effects on the Allocation of Capital Among Sectors and Among Individuals: A Portfolio Approach
This paper deals with the allocational effects and implications for efficiency of a tax system in which the rate of tax on capital income differs depending on the recipient of the income and on the type of capital producing the income. It suggests that, in their attempts to measure the distortionary effect of the U.S. capital income tax system, economists may have been looking in the wrong places. In the presence of uncertainty, the intersectoral distortion may be much less than had previously been imagined. However, the tax system distorts at two other margins which have not received much attention. It distorts the inter-household allocation of the housing stock, since the after-tax rate of interest is one component of the opportunity cost of owner-occupied housing. It also distorts the inter-household allocation of risk-bearing. Calculations using a simple commutable general equilibrium model suggest that the excess burden from these latter two distortions are significant components of the total distortionary impact of the tax system.
|Date of creation:||Aug 1982|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- Alan J. Auerbach, 1981. "Evaluating the Taxation of Risky Assets," NBER Working Papers 0806, National Bureau of Economic Research, Inc.
- Shoven, John B, 1976. "The Incidence and Efficiency Effects of Taxes on Income from Capital," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1261-83, December.
- Joseph E. Stiglitz, 1970. "Taxation, Risk-Taking, and the Allocation of Investment," Cowles Foundation Discussion Papers 305, Cowles Foundation for Research in Economics, Yale University.
- Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70, pages 215.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0951. 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: ()
If references are entirely missing, you can add them using this form.