SFB 303 Discussion Paper No. A - 276

Author: Keuschnigg, Christian
Title: The Transition to a Cash Flow Income Tax
Abstract: The paper presents a one good two country computable general equilibrium model with overlapping generations to evaluate intertemporal and international effects from tax reform. Model treatment of household and firm behavior is firmly rooted in the microeconomic theory of intertemporal choice. The paper considers the effects from the implementation of a cash flow income tax which was shown to be neutral with respect to intertemporal decisions. The paper compares the effects in closed and open economies. In solving for transition paths to new intertemporal equilibria, I also discuss the generational welfare consequences of various arrangements that affect the transition paths.
JEL-Classification-Number: 323
Creation-Date: January 1990
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