Change-Over within Little Scope: On the Decision Neutrality of Recent Tax Reform Proposals
48 Pages Posted: 9 Jan 2011
Date Written: January 7, 2011
Abstract
Political economy aspects make progressive income taxation and taxation of capital income imperative in practise. International tax competition and profit shifting, in turn, put pressure on corporate and capital taxes. Hence, the scope for a politically feasible change-over to a status of improved taxation is little. We provide an extended dynamic general equilibrium model and analyze politically feasible recent reform proposals referring neutrality. We then propose an alternative tax reform that, in contrast to these proposals, guarantees even growth neutrality, without necessarily jeopardizing political feasibility.
Keywords: Dynamic general equilibrium models, taxation, tax reform, decision neutrality, ACE, dual income tax
JEL Classification: H21, H24, H25, D58
Suggested Citation: Suggested Citation