The Role of Tax-Deductible Saving in the Transition from a Progressive Income Tax to a Progressive Consumption Tax
This paper examines the steady state and transition effects of converting from a graduated income tax to a graduated consumption tax. The authors' simulation results suggest that considerable dynamic efficiency gains could be achieved by switching to a graduated consumption tax, where all saving is tax deductible. An alternative tax system, permitting both tax-deductible and non-tax-deductible saving, is also examined. It is shown that not only is such a tax system a feasible way of implementing a graduated consumption tax, but also an alternative tax without any limits on tax-deductible saving could be more efficient than even a graduated consumption tax in a steady state.
Year of publication: |
1988
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Authors: | Daly, Michael J ; Lastman, Gary J ; Naquib, Fadle |
Published in: |
Public Finance = Finances publiques. - Vol. 43.1988, 3, p. 349-72
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