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Capital Gains Tax Cuts, Investment, and Growth

  • Steven M. Fazzari

    (The Jerome Levy Economics Institute)

  • Benjamin Herzon

    (The Jerome Levy Economics Institute)

Congress currently is considering changes in the capital gains tax, including reducing the rate, indexing the rate to inflation, or some combination of reduction and indexing. These changes have been advocated on the grounds that a cut in the rate will stimulate investment and economic growth. In this working paper, Research Associate Steven M. Fazzari and Benjamin Herzon, a doctoral candidate at Washington University, present a theoretical analysis of the effect of a tax cut on the cost of capital, investment, and output.

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File URL: http://econwpa.repec.org/eps/mac/papers/9811/9811006.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 9811006.

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Length: 41 pages
Date of creation: 19 Nov 1998
Date of revision:
Handle: RePEc:wpa:wuwpma:9811006
Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 41; figures: included
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Robert S. Chirinko, 1993. "Business fixed investment spending: a critical survey of modeling strategies, empirical results, and policy implications," Research Working Paper 93-01, Federal Reserve Bank of Kansas City.
  2. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-57, April.
  3. Martin Feldstein & Lawrence Summers, 1983. "Inflation and the Taxation of Capital Income in the Corporate Sector," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 116-152 National Bureau of Economic Research, Inc.
  4. Steven M. Fazzari & Anna Maria Variato, 1994. "Asymmetric Information and Keynesian Theories of Investment," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 16(3), pages 351-369, April.
  5. James M. Poterba, 1988. "Venture Capital and Capital Gains Taxation," Working papers 508, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. R. Glenn Hubbard, 1997. "Capital-Market Imperfections and Investment," NBER Working Papers 5996, National Bureau of Economic Research, Inc.
  7. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  8. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-46, April.
  9. Martin Feldstein & James M. Poterba & Louis Dicks-Mireaux, 1981. "The Effective Tax Rate and the Pretax Rate of Return," NBER Working Papers 0740, National Bureau of Economic Research, Inc.
  10. Joseph J. Minarik, 1992. "Capital Gains Taxation, Growth, And Fairness," Contemporary Economic Policy, Western Economic Association International, vol. 10(3), pages 16-25, 07.
  11. Yolanda K. Henderson, 1986. "Lessons from federal reform of business taxes," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 9-25.
  12. Laurence H. Meyer & Joel L. Prakken & Chris P. Varvares, 1993. "Policy Watch: Designing an Effective Investment Tax Credit," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 189-196, Spring.
  13. Auerbach, Alan J, 1983. "Taxation, Corporate Financial Policy and the Cost of Capital," Journal of Economic Literature, American Economic Association, vol. 21(3), pages 905-40, September.
  14. Fullerton, Don, et al, 1981. "Corporate Tax Integration in the United States: A General Equilibrium Approach," American Economic Review, American Economic Association, vol. 71(4), pages 677-91, September.
  15. Jonathan Skinner & Daniel Feenberg, 1990. "The Impact of the 1986 Tax Reform Act on Personal Saving," NBER Working Papers 3257, National Bureau of Economic Research, Inc.
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