The Marginal Excess Burden of Different Capital Tax Instruments

Don Fullerton () and Yolanda Kodrzycki Henderson

The Review of Economics and Statistics, 1989, vol. 71, issue 3, 435-42

Abstract: Others have measured the addition to deadweight loss from an increase in an effective capital income tax rate, but there is no single way to raise such a rate. In the authors' general equilibrium model with multiple distortions in the allocation of real resources, they find that an increase in the statutory corporate income tax rate has the highest marginal excess burden, because it distorts intersectoral and interasset decisions as well as intertemporal decisions. An investment tax credit reduction has negative marginal excess burden because it raises revenue while reducing interasset distortions more than it increases intertemporal distortions. Copyright 1989 by MIT Press.

Date: 1989
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Working Paper: The Marginal Excess Burden of Different Capital Tax Instruments (1987)
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