Dual income tax systems can suffer from income that shifts from progressively taxed labour income to capital income, which is taxed at a lower, flat rate. This paper empirically examines the 1993 Finnish dual income tax reform, which radically reduced the marginal tax rates on capital income for some, but not all, taxpayers. We measure how overall taxable income and the relative shares of capit...

For the standard specification of the utilitarian optimal income tax problem with hidden characteristics, the paper shows that randomized tax schemes are undesirable if preferences exhibit a property of weakly decreasing risk aversion according to the multidimensional risk aversion concept of Hellwig (2004). The property of decreasing risk aversion also implies uniqueness of the optimal income ...

State governments have traditionally raised revenue from business by taxing corporate income. But in recent years the growing difficulty of administering state corporate income taxes has prompted a search for alternative ways of taxing companies. This search for new business taxes has ironically sparked a resurgence in one of the world’s oldest broad-based tax structures: the gross receipts tax...

Multinational companies can shift profit and income between branches in order to reduce the overall tax liabilities of the company. The result is a tax competition between countries. In this paper we consider the sequential choice of tax rates to illustrate the potential effects of tax leadership. We use a profit shifting model with multinational firms that operate in two countries, large and s...

We analytically and quantitatively examine a prominent justi…cation for capital income taxation: goods preferred by those with high ability ought to be taxed. We study an environment where commodity taxes are allowed to be nonlinear functions of income and consumption and show that a relationship between ability and preferences over goods provides a novel reason for sophisticated distortionary ...

This paper develops and applies a simple framework for measuring the incidence of the corporate tax. This framework offers an empirical approach that jointly analyzes the degree to which owners of capital and workers share the burdens of corporate income taxes with the restriction that the overall burden is ultimately shared between them. Data on the foreign activities of American multinational...

This paper studies an international tax policy design problem by employing a two-country dynamic general equilibrium model with incomplete asset markets. We investigate the possibility of welfareimproving active tax policies, in particular capital and labor income tax, under the non-cooperative Nash equilibrium and the cooperative equilibrium. Unlike the conventional wisdom regarding stabilizat...

Can we use neoclassical growth model to single out the important transmission channels through which external factors or ‘primitives’ affected the Indian economy and caused the remarkable growth of the period 1982–2002? In this paper, we answer the question by applying the new technique of business cycle accounting to the Indian economy. Our results show us that the primary conduit of policies ...

We contrast e¤ects of taxing non-renewable resources with the e¤ects of traditional capital taxes and investment subsidies in an endogenous growth model. In a simple framework we demonstrate that when non-renewable resources are a necessary input in the sector where growth is ultimately generated, interest income taxes and investment subsidies can no longer a¤ect the long-run growth rate, where...

The recent series of papers by Bovemberg, Goulder, Parry and others argue that the double dividend is unlikely to exist because of second-best problems. They argue that the imposition of environmental tax in an economy already distorted by income taxes will further distort the economy by reducing incentives to supply labor. Our paper argues that this is not likely to be the case because of the ...