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Journal Article

Tax structure and welfare in a model of optimal fiscal policy


Abstract: A study of the welfare implications of some basic structural features of the U.S. tax code, including the tax deductibility of depreciation and the practice of taxing labor income differently than capital income. The results show that long-run welfare and output can be improved by a policy of accelerated depreciation, whereby the depreciation rate for tax purposes exceeds the rate of economic depreciation.

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Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Economic Review

Publication Date: 1997

Issue: Q I

Pages: 11-23