A Tale of Tax Policies in Open Economies

Auray, Stéphane; Eyquem, Aurélien; Gomme, Paul

A Tale of Tax Policies in Open Economies

Stéphane Auray, Aurélien Eyquem and Paul Gomme

No 2012-32, Working Papers from Center for Research in Economics and Statistics

Abstract: Tax-based deficit reduction experiments for the U.S. and EMU-12 are conducted using an open economy model. In welfare terms, raising the consumption tax is the least costly, followed by the labor income tax, then the capital income tax. Use of an open economy model means that the incidence of the consumption tax is borne in part by foreign producers. Among revenue-neutral tax experiments, partially replacing the capital income tax is welfare-enhancing, although there are short term losses. Replacing labor income tax revenue with a consumption tax improves international competitiveness and is welfare-improving

Keywords: Fiscal policies; open economies; public deficits; tax reforms (search for similar items in EconPapers)
JEL-codes: E31 E62 F41 (search for similar items in EconPapers)
Pages: 41
Date: 2012-04
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Citations: View citations in EconPapers (2)

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