A Reexamination of Tax Distortions in General Equilibrium Models

74 Pages Posted: 26 Jul 2001 Last revised: 28 Dec 2001

See all articles by Don Fullerton

Don Fullerton

University of Illinois at Urbana-Champaign - Department of Finance; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Roger H. Gordon

University of California, San Diego (UCSD) - Department of Economics; Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: May 1981

Abstract

General equilibrium models have recently been used to simulate the effects of many proposed tax changes. However, in modeling the effects of the government on the economy, these models have assumed for simplicity that marginal tax rates equal the observed average tax rates, and that marginal benefit rates are zero. The main purpose of this paper is to derive improved estimates of various marginal tax and benefit rates. Most importantly, we include in the model recent theories concerning the effects of combined corporate and personal taxes on corporate financial and investment decisions. The conclusions previously derived concerning the effects of corporate tax integration are then reexamined in light of the proposed changes.

Suggested Citation

Fullerton, Don and Gordon, Roger H., A Reexamination of Tax Distortions in General Equilibrium Models (May 1981). NBER Working Paper No. w0673. Available at SSRN: https://ssrn.com/abstract=278025

Don Fullerton (Contact Author)

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
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National Bureau of Economic Research (NBER)

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CESifo (Center for Economic Studies and Ifo Institute)

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Roger H. Gordon

University of California, San Diego (UCSD) - Department of Economics ( email )

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Harvard University - Department of Economics ( email )

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United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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