Tax incidence for fragile financial markets

Felix Bierbrauer

Journal of Public Economics, 2014, vol. 120, issue C, 107-125

Abstract: Standard tax incidence analysis deals with households and firms that buy and sell consumption goods, as opposed to financial institutions that buy and sell financial products. This paper develops a framework that allows us to study tax incidence on financial markets, and applies it to a financial transactions tax. A main result is that the tax may contribute to financial distress. Moreover, if the government has to bail out the debtors of failed financial institutions, the tax-induced increase in bailout costs may be larger than the increase in tax revenue, so that the government's overall fiscal position becomes worse.

Keywords: Tax incidence; Financial markets; Financial transactions tax (search for similar items in EconPapers)
JEL-codes: G18 G21 G28 H22 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:120:y:2014:i:c:p:107-125

DOI: 10.1016/j.jpubeco.2014.09.002

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