Laffer strikes again: Dynamic scoring of capital taxes

Arbeitspapier

We set up a neoclassical growth model extended by a corporate sector, an investment and finance decision of firms, and a set of taxes on capital income. We provide analytical dynamic scoring of taxes on corporate income, dividends, capital gains, other private capital income, and depreciation allowances and identify the intricate ways through which capital taxation affects tax revenue in general equilibrium. We then calibrate the model for the US and explore quantitatively the revenue effects from capital taxation. We take adjustment dynamics after a tax change explicitly into account and compare with steady-state effects. We find, among other results, a self-financing degree of corporate tax cuts of about 70-90 percent and a very flat Laffer curve for all capital taxes as well as for tax depreciation allowances. Results are strongest for the tax on capital gains. The model predicts for the US that total tax revenue increases by about 0.3 to 1.2 percent after abolishment of the tax.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Diskussionsbeitrag ; No. 454

Classification and Topics

• Classification: Wirtschaft ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General ; Taxation, Subsidies, and Revenue: General ; Economic Growth and Aggregate Productivity: General
• Subject: Corporate taxation ; capital gains ; tax allowances ; revenue estimation ; Laffer curve ; dynamic scoring ; Wertzuwachssteuer ; Kapitalertragsteuer ; Steuerbegünstigung ; Laffer-Kurve ; Allgemeines Gleichgewicht ; Theorie ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Strulik, Holger ; Trimborn, Timo
• Event: Veröffentlichung
• (who): Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät
• (where): Hannover
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/66018
• Last update: 10.03.2025, 11:43 AM CET