Gradual Reforms of Capital Income Taxation

Peter Howitt and Hans-Werner Sinn

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: This paper analyzes the intertemporal allocation effects of anticipated tax rate changes, reconsidering the recommendations of the Meade Committee in a perfect foresight general equilibrium model of economic growth. It is shown that the R-base (or consumption) tax can be more distortionary than an income tax and that a revenue-neutral integration of corporate and personal taxation will lower social welfare. Moreover, it is argued that a dividend tax dominates the R-base tax because it places its distortions on the financial, rather than on the real, side of the economy. Copyright 1989 by American Economic Association.

Date: 1989
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Published in The American Economic Review 1 79(1989): pp. 106-124

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Related works:
Journal Article: Gradual Reforms of Capital Income Taxation (1989)
Working Paper: Gradual Reforms of Capital Income Taxation (1986)
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