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The Johansson-Samuelson Theorem in General Equilibrium: A Rebuttal

  • Francesco Menoncin
  • Paolo M. Panteghini

The well-know Johansson-Samuelson Theorem proves that, in partial equilibrium, comprehensive income taxation with a uniform tax rate is neutral in terms of investment decisions, if fiscal depreciation allowances coincide with economic depreciation. In this article we show that this result does not hold in general equilibrium, unless fairly restrictive conditions are met.

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Paper provided by University of Brescia, Department of Economics in its series Working Papers with number 0806.

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Date of creation: 2008
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Handle: RePEc:ubs:wpaper:0806
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  1. Louis Kaplow, 1991. "Taxation and Risk Taking: A General Equilibrium Perspective," NBER Working Papers 3709, National Bureau of Economic Research, Inc.
  2. Gordon, Roger H, 1985. "Taxation of Corporate Capital Income: Tax Revenues versus Tax Distortions," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 1-27, February.
  3. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  4. Boadway, Robin & Bruce, Neil, 1984. "A general proposition on the design of a neutral business tax," Journal of Public Economics, Elsevier, vol. 24(2), pages 231-239, July.
  5. Joao Gomes & Leonid Kogan & Lu Zhang, 2003. "Equilibrium Cross Section of Returns," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 693-732, August.
  6. Darrell Duffie & William Zame, 1988. "The Consumption-Based Capital Asset Pricing Model," Discussion Papers 88-10, University of Copenhagen. Department of Economics.
  7. Kaplow, Louis, 1994. "Taxation and Risk Taking: A General Equilibrium Perspective," National Tax Journal, National Tax Association, vol. 47(4), pages 789-98, December.
  8. Michael P. Devereux, 2003. "Measuring Taxes on Income from Capital," CESifo Working Paper Series 962, CESifo Group Munich.
  9. Jeremy I. Bulow & Lawrence H. Summers, 1982. "The Taxation of Risky Assets," NBER Working Papers 0897, National Bureau of Economic Research, Inc.
  10. Vasicek, Oldrich Alfons, 2005. "The economics of interest rates," Journal of Financial Economics, Elsevier, vol. 76(2), pages 293-307, May.
  11. Paul A. Samuelson, 1964. "Tax Deductibility of Economic Depreciation to Insure Invariant Valuations," Journal of Political Economy, University of Chicago Press, vol. 72, pages 604.
  12. Asea, Patrick K. & Turnovsky, Stephen J., 1998. "Capital income taxation and risk-taking in a small open economy," Journal of Public Economics, Elsevier, vol. 68(1), pages 55-90, April.
  13. Rainer Niemann, 2004. "Tax Rate Uncertainty, Investment Decisions, and Tax Neutrality," International Tax and Public Finance, Springer, vol. 11(3), pages 265-281, 05.
  14. Andrew B. Abel, 2007. "Optimal Capital Income Taxation," NBER Working Papers 13354, National Bureau of Economic Research, Inc.
  15. Fane, G., 1987. "Neutral taxation under uncertainty," Journal of Public Economics, Elsevier, vol. 33(1), pages 95-105, June.
  16. Hartwick, John M. & Karp, Larry & Long, Ngo Van, 2002. "Depreciation rules and value invariance with extractive firms," Journal of Economic Dynamics and Control, Elsevier, vol. 26(1), pages 99-116, January.
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