Tax structure, welfare, and the stability of equilibrium in a model of dynamic optimal fiscal policy

Jang-Ting Guo and Kevin Lansing

No 9410, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: A demonstration that the assumed structure of taxation can have dramatic effects on economic welfare and on the stability of the steady state in a dynamic general-equilibrium model of optimal fiscal policy. The authors find that household welfare is highest under a structure that includes separate tax rates on labor and capital incomes, double taxation of dividends, and tax-deductible depreciation.

Keywords: Taxation; Fiscal policy (search for similar items in EconPapers)
Date: 1994
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