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Which Effective Tax Rate?

  • Don Fullerton

In estimating the effects of capital income taxation, different studies measure different effective tax rates. This paper categorizes effective tax rate estimates into six basic types, and discusses the usefulness of each. For marginal effective tax rates, some studies estimate the additional taxes associated with a marginal increase in the inflation and interest rates, while others estimate the additional taxes associated with a marginal increase in investment. Because there are six basic types of rates, because of the different procedures that can be used to estimate each type, and because of different assumptions about the margin, care should be taken in the application and use of effective tax rate estimates.

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File URL: http://www.nber.org/papers/w1123.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1123.

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Date of creation: May 1983
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Publication status: published as Fullerton, Don. "Which Effective Tax Rate?" National Tax Journal, Vol. 37 , No. 1 (March 1984), pp. 23-41.
Handle: RePEc:nbr:nberwo:1123
Note: PE
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Mervyn A. King & Don Fullerton, 1983. "The Taxation of Income from Capital: A Comparative Study of the U.S., U.K., Sweden, and West Germany--The Theoretical Framework--," NBER Working Papers 1058, National Bureau of Economic Research, Inc.
  2. Martin Feldstein & Lawrence H. Summers, 1979. "Inflation and the Taxation of Capital Income in the Corporate Sector," NBER Working Papers 0312, National Bureau of Economic Research, Inc.
  3. Joel B. Slemrod, 1983. "A General Equilibrium Model of Taxation with Endogenous Financial Behavior," NBER Chapters, in: Behavioral Simulation Methods in Tax Policy Analysis, pages 427-458 National Bureau of Economic Research, Inc.
  4. Mervyn A. King, 1980. "An econometric model of tenure choice and demand for housing as a joint decision," NBER Chapters, in: Econometric Studies in Public Finance, pages 137-159 National Bureau of Economic Research, Inc.
  5. John B. Shoven & Jeremy I. Bulow, 1976. "Inflation Accounting and Nonfinancial Corporate Profits: Financial Assets and Liabilities," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(1), pages 15-66.
  6. David F. Bradford, 1978. "Tax Neutrality and the Investment Tax Credit," NBER Working Papers 0269, National Bureau of Economic Research, Inc.
  7. McGuire, Martin, 1974. "Group Segregation and Optimal Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 112-32, Jan.-Feb..
  8. Boskin, Michael J, 1978. "Taxation, Saving, and the Rate of Interest," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages S3-27, April.
  9. Mervyn A. King & Don Fullerton, 1983. "The Taxation of Income from Capital: A Comparative Study of the U.S., U.K., Sweden and West Germany--Comparisons of Effective Tax Rates--," NBER Working Papers 1073, National Bureau of Economic Research, Inc.
  10. Joel Slemrod, 1982. "Down-Payment Constraints: Tax Policy Effects in a Growing Economy With Rental and Owner-Occupied Housing," Public Finance Review, , vol. 10(2), pages 193-217, April.
  11. Don Fullerton & Roger H. Gordon, 1983. "A Reexamination of Tax Distortions in General Equilibrium Models," NBER Chapters, in: Behavioral Simulation Methods in Tax Policy Analysis, pages 369-426 National Bureau of Economic Research, Inc.
  12. King, Mervyn A., 1980. "An econometric model of tenure choice and demand for housing as a joint decision," Journal of Public Economics, Elsevier, vol. 14(2), pages 137-159, October.
  13. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
  14. Don Fullerton & Yolanda K. Henderson, 1981. "Long-Run Effects of the Accelerated Cost Recovery System," NBER Working Papers 0828, National Bureau of Economic Research, Inc.
  15. David F. Bradford, 1979. "The Incidence and Allocation Effects of a Tax on Corporate Distributions," NBER Working Papers 0349, National Bureau of Economic Research, Inc.
  16. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  17. Summers, Lawrence H, 1981. "Capital Taxation and Accumulation in a Life Cycle Growth Model," American Economic Review, American Economic Association, vol. 71(4), pages 533-44, September.
  18. Harvey Galper & Eric Toder, 1984. "Transfer Elements in the Taxation of Income from Capital," NBER Chapters, in: Economic Transfers in the United States, pages 87-138 National Bureau of Economic Research, Inc.
  19. Martin Feldstein, 1978. "The Welfare Cost of Capital Income Taxation," NBER Chapters, in: Research in Taxation, pages 29-51 National Bureau of Economic Research, Inc.
  20. Feldstein, Martin & Dicks-Mireaux, Louis & Poterba, James, 1983. "The effective tax rate and the pretax rate of return," Journal of Public Economics, Elsevier, vol. 21(2), pages 129-158, July.
  21. Robin Boadway & Neil Bruce & Jack Mintz, 1982. "Taxation, Inflation and the User Cost of Capital in Canada," Working Papers 506, Queen's University, Department of Economics.
  22. Fullerton, Don & Shoven, John B. & Whalley, John, 1983. "Replacing the U.S. income tax with a progressive consumption tax : A sequenced general equilibrium approach," Journal of Public Economics, Elsevier, vol. 20(1), pages 3-23, February.
  23. Hamilton, Bruce W, 1976. "Capitalization of Intrajurisdictional Differences in Local Tax Prices," American Economic Review, American Economic Association, vol. 66(5), pages 743-53, December.
  24. Robert M. Coen, 1980. "Alternative Measures of Capital and Its Rate of Return in United States Manufacturing," NBER Chapters, in: The Measurement of Capital, pages 121-152 National Bureau of Economic Research, Inc.
  25. Michael J. Boskin, 1978. "Taxation, Saving, and the Rate of Interest," NBER Chapters, in: Research in Taxation, pages 3-27 National Bureau of Economic Research, Inc.
  26. 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.
  27. Charles L. Ballard & Don Fullerton & John B. Shoven & John Whalley, 1985. "General Equilibrium Analysis of Tax Policies," NBER Chapters, in: A General Equilibrium Model for Tax Policy Evaluation, pages 6-24 National Bureau of Economic Research, Inc.
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