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Federal Reserve Bank of Cleveland
Economic Review
Tax structure and welfare in a model of optimal fiscal policy
Jan-Ting Guo
Kevin J. Lansing
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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Jan-Ting Guo & Kevin J. Lansing, "Tax structure and welfare in a model of optimal fiscal policy" , Federal Reserve Bank of Cleveland, Economic Review, issue Q I, pages 11-23, 1997.
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