Transitional Protection During Conversion to a Personal Consumption Tax

Kenneth Lewis and Laurence Seidman

Public Finance Review, 2000, vol. 28, issue 2, 99-119

Abstract: This article constructs a transitional protection rule-an “old-wealth deduction†-for conversion of the income tax to a personal consumption tax and tests it in four stylized life cycle economies (identical, pension, bequest, and spender) by performing numerical simulations. It is assumed that the compensated elasticity of saving with respect to the interest rate is zero (the uncompensated elasticity is negative). In all four economies, the protection rule substantially reduces the harm to older cohorts from tax conversion; at the same time, young and future cohorts continue to benefit (in almost all cases) from tax conversion despite this protection rule. The results may be sensitive to the particular functions used in the model: a Cobb-Douglas production function and a Leontief utility function (implying a zero compensated saving elasticity).

Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/109114210002800201 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:28:y:2000:i:2:p:99-119

DOI: 10.1177/109114210002800201

Access Statistics for this article

More articles in Public Finance Review
Bibliographic data for series maintained by SAGE Publications ().