Tax Neutrality and the Social Discount Rate: A Suggested Framework

27 Pages Posted: 5 Jul 2004

See all articles by Alan J. Auerbach

Alan J. Auerbach

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: February 1980

Abstract

There is probably no specific problem in tax analysis which has generated as much study and discussion among economists as the question of how to formulate "neutral" tax incentives for investment. Yet no consensus has been reached concerning the proper approach to take when adjusting taxes. Comparing the two fundamental notions of neutrality found in the literature, referred to here as "present value" rules and "internal rate of return" rules, we argue that there is both a single appropriate neutrality criterion (the latter) and a framework which can be used to evaluate the performance of a tax system with respect to this criterion.

Suggested Citation

Auerbach, Alan Jeffrey, Tax Neutrality and the Social Discount Rate: A Suggested Framework (February 1980). NBER Working Paper No. w0457. Available at SSRN: https://ssrn.com/abstract=262077

Alan Jeffrey Auerbach (Contact Author)

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
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510-643-0711 (Phone)
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National Bureau of Economic Research (NBER) ( email )

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Munich, DE-81679
Germany

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