A Disaggregate Equilibrium Model of the Tax Distortions Among Assets, Sectors, and Industries

43 Pages Posted: 19 Feb 2004 Last revised: 17 Sep 2010

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)

Yolanda K. Henderson

affiliation not provided to SSRN

Date Written: April 1986

Abstract

This paper encompasses multiple sources of inefficiency introduced by the U.S. tax system into a single general equilibrium model. Using disaggregate calculations of user cost, we measure interasset distortions from the differential taxation of many types of assets. Simultaneously, we model the intersectoral distortions from the differential treatment of the corporate sector, noncorporate sector, and owner-occupied housing. Industries in the model have different uses of assets and degrees of incorporation. Results indicate that distortions between sectors are much smaller than those of the Harberger model. Distortions among industries arealso much smaller than those in models using average effective tax rates. Distortions among assets are larger, but the total of all these welfare costs is still below one percent of income.

Suggested Citation

Fullerton, Don and Henderson, Yolanda K., A Disaggregate Equilibrium Model of the Tax Distortions Among Assets, Sectors, and Industries (April 1986). NBER Working Paper No. w1905. Available at SSRN: https://ssrn.com/abstract=344748

Don Fullerton (Contact Author)

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

1206 South Sixth Street
Champaign, IL 61820
United States
(217) 244-3621 (Phone)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Yolanda K. Henderson

affiliation not provided to SSRN

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