CAPITAL TAX REFORMS WITH POLICY UNCERTAINTY

Árpád Ábrahám, Pavel Brendler and Eva Cárceles‐Poveda

International Economic Review, 2024, vol. 65, issue 1, 75-116

Abstract: One important feature of capital tax reforms is the uncertainty regarding their duration. In a standard heterogeneous firm framework with financial frictions, we model policy uncertainty by assuming that reforms may be either repealed or maintained with some probability every period. We illustrate the effects of policy uncertainty in the context of the 2003 Bush tax cuts (2003 Job Growth Tax Relief Reconciliation Act), which lowered shareholder taxes. We show that policy uncertainty regarding dividend and capital gains taxes can explain why the Bush tax cuts had no statistically significant effect on investment, in line with the empirical evidence.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/iere.12664

Related works:
Working Paper: Capital Tax Reforms With Policy Uncertainty (2023)
Working Paper: Capital Tax Reforms With Policy Uncertainty (2021)
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:wly:iecrev:v:65:y:2024:i:1:p:75-116

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0020-6598

Access Statistics for this article

International Economic Review is currently edited by Michael O'Riordan and Dirk Krueger

More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297. Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().