Growth Effects of Income and Consumption Taxes: Positive and Normative Analysis
July 1, 1995
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Summary
The effects of income and consumption taxation are examined in the context of models in which the growth process is driven by the accumulation of human and physical capital. The different channels through which these taxes affect economic growth are discussed, and it is shown that in general the taxation of factor incomes (human and physical capital) is growth-reducing. The effects of consumption taxation on growth depend crucially on the elasticity of labor supply, and therefore on the specification of the leisure activity. The paper also derives some implications for the optimal intertemporal choice of tax instruments.
Subject: Capital income tax, Consumption, Consumption taxes, Human capital, Income and capital gains taxes, Income tax systems, Labor, Taxes
Keywords: accumulation technology, analysis consumption tax, Capital income tax, Consumption taxes, distortionary tax, growth-maximizing tax structure, Human capital, Income and capital gains taxes, income tax, Income tax systems, income taxation, long-run growth, optimal taxation plan, physical capital, physical capital taxation, tax measure, tax variable, taxation analysis, uniform consumption tax, WP
Pages:
38
Volume:
1995
DOI:
Issue:
062
Series:
Working Paper No. 1995/062
Stock No:
WPIEA0621995
ISBN:
9781451848236
ISSN:
1018-5941
