Capital Taxation During the U.S. Great Depression

39 Pages Posted: 13 Dec 2010

See all articles by Ellen R. McGrattan

Ellen R. McGrattan

Federal Reserve Bank of Minneapolis - Research Department; University of Minnesota - Twin Cities; National Bureau of Economic Research (NBER)

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Date Written: December 2010

Abstract

Previous studies of the U.S. Great Depression find that increased taxation contributed little to either the dramatic downturn or the slow recovery. These studies include only one type of capital taxation: a business profits tax. The contribution is much greater when the analysis includes other types of capital taxes. A general equilibrium model extended to include taxes on dividends, property, capital stock, and excess and undistributed profits predicts patterns of output, investment, and hours worked more like those in the 1930s than found in earlier studies. The greatest effects come from the increased tax on corporate dividends.

Suggested Citation

McGrattan, Ellen R., Capital Taxation During the U.S. Great Depression (December 2010). NBER Working Paper No. w16588, Available at SSRN: https://ssrn.com/abstract=1723016

Ellen R. McGrattan (Contact Author)

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University of Minnesota - Twin Cities

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