The Fiscal State-Dependent Effects of Capital Income Tax Cuts /

Using the post-WWII data of U.S. federal corporate income tax changes, within a Smooth Transition VAR, this paper finds that the output effect of capital income tax cuts is government debt-dependent: it is less expansionary when debt is high than when it is low. To explore the mechanisms that can dr...

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Détails bibliographiques
Auteur principal: Fotiou, Alexandra
Autres auteurs: Shen, Wenyi, Susan Yang, Shu-Chun
Format: Revue
Langue:English
Publié: Washington, D.C. : International Monetary Fund, 2020.
Collection:IMF Working Papers; Working Paper ; No. 2020/071
Accès en ligne:Full text available on IMF
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245 1 4 |a The Fiscal State-Dependent Effects of Capital Income Tax Cuts /  |c Alexandra Fotiou, Wenyi Shen, Shu-Chun Susan Yang. 
264 1 |a Washington, D.C. :  |b International Monetary Fund,  |c 2020. 
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490 1 |a IMF Working Papers 
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520 3 |a Using the post-WWII data of U.S. federal corporate income tax changes, within a Smooth Transition VAR, this paper finds that the output effect of capital income tax cuts is government debt-dependent: it is less expansionary when debt is high than when it is low. To explore the mechanisms that can drive this fiscal state-dependent tax effect, the paper uses a DSGE model with regime-switching fiscal policy and finds that a capital income tax cut is stimulative to the extent that it is unlikely to result in a future fiscal adjustment. As government debt increases to a sufficiently high level, the probability of future fiscal adjustments starts rising, and the expansionary effects of a capital income tax cut can diminish substantially, whether the expected adjustments are through a policy reversal or a consumption tax increase. Also, a capital income tax cut need not always have large revenue feedback effects as suggested in the literature. 
538 |a Mode of access: Internet 
700 1 |a Shen, Wenyi. 
700 1 |a Susan Yang, Shu-Chun. 
830 0 |a IMF Working Papers; Working Paper ;  |v No. 2020/071 
856 4 0 |z Full text available on IMF  |u http://elibrary.imf.org/view/journals/001/2020/071/001.2020.issue-071-en.xml  |z IMF e-Library