Working Paper

Tax structure, welfare, and the stability of equilibrium in a model of dynamic optimal fiscal policy


Abstract: A demonstration that the assumed structure of taxation can have dramatic effects on economic welfare and on the stability of the steady state in a dynamic general-equilibrium model of optimal fiscal policy. The authors find that household welfare is highest under a structure that includes separate tax rates on labor and capital incomes, double taxation of dividends, and tax-deductible depreciation.

Keywords: Fiscal policy; Taxation;

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Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers (Old Series)

Publication Date: 1994

Number: 9410