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...

Few macroeconomic studies exist on the effects of taxes on international trade. Our hypothesis is that higher tax rates raise a country’s production costs, leading to a decrease in exports in the long run. With panel data for 25 OECD countries, we use average effective tax rates on consumption, labor income and capital income to examine their impact on bilateral trade. We find that that all thr...

Due to time-inconsistency or political turnover, policymakers’ promises are not always fulfilled. We analyze an optimal fiscal policy problem where the plans made by the benevolent government are periodically revised. In this loose commitment setting, the properties of labor and capital income taxes are significantly different than under the full-commitment and no-commitment assumptions. Becaus...

T he U.S. government subjects corporate dividends to double taxation: It first taxes corporate income, then taxes the same income again when shareholders receive dividends paid out of corporate income. Until 2003, individuals were taxed on dividend income at the same rates as on other forms of income, resulting in overall taxes on dividends much higher than those in most other countries (PriceW...