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Federal Reserve Bank of Cleveland
Working Papers (Old Series)
Tax structure, welfare, and the stability of equilibrium in a model of dynamic optimal fiscal policy
Jang-Ting Guo
Kevin J. Lansing
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.


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Jang-Ting Guo & Kevin J. Lansing, Tax structure, welfare, and the stability of equilibrium in a model of dynamic optimal fiscal policy, Federal Reserve Bank of Cleveland, Working Papers (Old Series) 9410, 1994.
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Keywords: Taxation ; Fiscal policy
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