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Capital taxation during the U.S. Great Depression

Ellen McGrattan

No 670, Working Papers from Federal Reserve Bank of Minneapolis

Abstract: Previous studies quantifying the effects of increased capital taxation during the U.S. Great Depression find that its contribution is small, both in accounting for the downturn in the early 1930s and in accounting for the slow recovery after 1934. This paper confirms that the effects are small in the case of taxation of business profits, but finds large effects in the case of taxation of dividend income. Tax rates on dividends rose dramatically during the 1930s and, when fed into a general equilibrium model, imply significant declines in investment and equity values and nontrivial declines in gross domestic product (GDP) and hours of work. The results are amplified if businesses make intangible investments which can be expensed from taxable capital income.

Keywords: Depressions; Taxation; Profit; Dividends (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-acc, nep-dge, nep-his and nep-pub
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Citations: View citations in EconPapers (2)

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http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4192 (application/pdf)
http://www.minneapolisfed.org/research/WP/WP670.pdf

Related works:
Journal Article: Capital Taxation During the U.S. Great Depression (2012) Downloads
Working Paper: Capital taxation during the U.S. Great Depression (2010) Downloads
Working Paper: Capital Taxation During the U.S. Great Depression (2010) Downloads
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