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The Capital Levy in Theory and Practice

  • Barry Eichengreen.

This paper shows how in theory, if the contingencies in response to which it is imposed are fully anticipated, independently verifiable and not under government control, then saving and investment should not fall following the imposition of a capital levy. Nor should the government find it more difficult to raise revenues subsequently, even if its non-recurrence cannot be guaranteed. In practice, however, serious problems stand in the way of implementation. Property owners are sure to delay its adoption and engage in capital flight, reducing the prospective yield and allowing the special circumstances providing the justification for the levy to recede into the past.

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Paper provided by University of California at Berkeley in its series Economics Working Papers with number 89-117.

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Date of creation: 01 Aug 1989
Date of revision:
Handle: RePEc:ucb:calbwp:89-117
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  1. V. V. Chari & Patrick J Kehoe, 1998. "Sustainable Plans," Levine's Working Paper Archive 600, David K. Levine.
  2. Herschel I. Grossman & John B. Van Huyck, 1985. "Sovereign Debt as a Contingent Claim: Excusable Default, Repudiation, and Reputation," NBER Working Papers 1673, National Bureau of Economic Research, Inc.
  3. Fischer, Stanley, 1980. "Dynamic inconsistency, cooperation and the benevolent dissembling government," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 93-107, May.
  4. Thomas J. Sargent, 1982. "The Ends of Four Big Inflations," NBER Chapters, in: Inflation: Causes and Effects, pages 41-98 National Bureau of Economic Research, Inc.
  5. Alberto Alesina, 1988. "Macroeconomics and Politics," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 13-62 National Bureau of Economic Research, Inc.
  6. Herschel I. Grossman, 1988. "The Political Economy of War Debts and Inflation," NBER Working Papers 2743, National Bureau of Economic Research, Inc.
  7. Prescott, Edward C., 1977. "Should control theory be used for economic stabilization?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 7(1), pages 13-38, January.
  8. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
  9. V.V. Chari, 1988. "Time consistency and optimal policy design," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 17-31.
  10. Henry Shavell, 1948. "Postwar Taxation in Japan," Journal of Political Economy, University of Chicago Press, vol. 56, pages 124.
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