Creator: Aiyagari, S. Rao. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 424 Keyword: Deficit, Taxation, Budget management, Federal government, Tax policy, Tax rates, Taxes , and Tax Subject (JEL): H62 - National budget, deficit, and debt - Deficit ; Surplus and H21 - Taxation, subsidies and revenue - Efficiency ; Optimal taxation
Creator: Braun, R. Anton. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 506 Abstract:
This paper investigates the macroeconomic effects of cyclical fluctuations in marginal tax rates. It finds that systematically including tax variables in a standard real business cycle model substantially improves the model's ability to reproduce basic facts about postwar U.S. business cycle fluctuations. In particular, modeling fluctuations in personal and corporate income tax rates increases the model's predicted relative variability of hours and decreases its predicted correlation between hours and average productivity. Fluctuations in tax rates produce large substitution effects that alter the leisure/labor supply decision.
Keyword: Tax rates, Real business cycle model, Corporate tax , Tax, Productivity, Taxation, Taxes, Business cycle, and Income tax Subject (JEL): E32 - Prices, business fluctuations, and cycles - Business fluctuations ; Cycles, H24 - Taxation, subsidies and revenue - Personal income and other nonbusiness taxes and subsidies, and H25 - Taxation, subsidies and revenue - Business taxes and subsidies
Creator: Huffman, Gregory W. Series: Finance, fluctuations, and development Abstract:
In this paper a dynamic model is constructed in which labor and capital taxes are determined endogenously through majority voting. The wealth distribution of the economy is shown to influence the voting behavior, and hence the equilibrium levels of the tax rates, which in turn affect the future distribution of wealth. It is shown that the economy exhibits a unique dynamic behavior. Because of the endogenously determined taxes, the asset prices, wealth distribution, and the tax rates can display persistent fluctuations, and even limit cycles, in reaction to exogenous disturbances, or even due to initial conditions. It is also shown that "tax smoothing" does not necessarily appear to naturally arise in such a model, as the economy can display extreme fluctuations in the endogenously determined tax rates.
Keyword: Wealth distribution, Voting behavior, Asset prices, Policy formulation, Dynamic general equilibrium model, and Tax rates Subject (JEL): H25 - Taxation, subsidies and revenue - Business taxes and subsidies, D31 - Distribution - Personal income, wealth, and their distributions, H20 - Taxation, subsidies and revenue - General, and H24 - Taxation, subsidies and revenue - Personal income and other nonbusiness taxes and subsidies