Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
966719 | Journal of Monetary Economics | 2008 | 26 Pages |
Abstract
We compute the welfare effects of different revenue-neutral tax reforms that eliminate capital income taxation in two general equilibrium models calibrated to the U.S. economy. In our dynastic model, the reform with the largest welfare gain is the one that eliminates all income taxation and increases the consumption tax to 35%; 75% of the population alive at the time of the reform benefit from it. Individuals use intervivos transfers and bequests to redistribute the long-run benefits. In a pure life-cycle economy that lacks this redistribution technology, we find that the same reform would benefit only 9% of the population.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Luisa Fuster, AyÅe Ä°mrohoroÄlu, Selahattin Ä°mrohoroÄlu,