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2 edition of Distortionary taxation and the debt Laffer curve found in the catalog.

Distortionary taxation and the debt Laffer curve

International Monetary Fund.

Distortionary taxation and the debt Laffer curve

by International Monetary Fund.

  • 27 Want to read
  • 37 Currently reading

Published by International Monetary Fund in Washington, D.C .
Written in English


Edition Notes

Statementprepared by Aasim M. Husain.
SeriesIMF working paper -- WP/92/10
ContributionsHusain, Aasim M., International Monetary Fund. Research Dept.
The Physical Object
Pagination14 p. --
Number of Pages14
ID Numbers
Open LibraryOL19809794M

Laffer curve are shown to hold for a portion only of the sample countries. The shape of the Laffer curve is shown to be closely associated with both the theoretical underpinnings of the crowding out hypothesis and the literature on the disincentive effects of taxation; i.e., a permanent reduction. and on the shape or even the presence of the Laffer curve. In order to understand the Laffer curve theory, it is necessary to understand how tax revenue is created. Tax revenue is a function of the tax rate times the tax base. Government revenue can decrease after a tax increase if the tax base falls by a large enough margin. WhetherCited by: 1.

“disprove” the Laffer Curve, and it also doesn’t render the tax cut a bad idea. After all, there is more to fiscal policy than simply maximizing government revenue. Tax rate cuts will always lead to more growth, employment, and income for citizens. Lessons from History: Three Tests of the Laffer Curve During the 20th century, the U.S. had. debt contracted to finance labor costs during the production period, firms also hold a large initial stock of debt that they must repay out of current revenue. Section InI derives a debt Laffer curve and determines the optimal level of debt. Section IV analyzes the effect of a reduction in the efficiency of.

indeed are on the ‘‘wrong’’ side of the Laffer curve for capital income taxation. Care needs to be taken in interpreting these results. Maximizing tax revenues is quite different from maximizing welfare. The higher the level of distortionary taxes in the model, the higher are the efficiency losses associated with taxation. With the Bush tax cuts due to expire soon and debates about raising top rates further to cut the budget deficit soon to follow, the Laffer curve is bound to come up again. The idea, popularized by economist Arthur Laffer and writer Jude Wanninski in the s and '80s, is simple. Tax rates of zero percent produce no revenue, for obvious reasons.


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Distortionary taxation and the debt Laffer curve by International Monetary Fund. Download PDF EPUB FB2

Get this from a library. Distortionary Taxation and the Debt Laffer Curve. [Aasim M Husain; International Monetary Fund.] -- This paper highlights the importance of the role of the domestic tax system in determining the economic consequences of an external debt overhang.

A simple taxation scheme is specified and it is. The increase of long-term debt has the property of acting as a hedge for distortionary taxation and innovations in aggregate consumption growth.

Another benefit is that it allows governments to trade current inflation for future inflation and spread the effects. The Laffer Curve is a theory that states lower tax rates boost economic underpins supply-side economics, Reaganomics, and the Tea Party’s economic policies.

Economist Arthur Laffer developed it. Laffer Curve: The Laffer Curve is a theory developed by supply-side economist Arthur Laffer to show the relationship between tax rates and the amount of tax revenue collected by governments.

The. In economics, the Laffer curve illustrates a theoretical relationship between rates of taxation and the resulting levels of the government's tax Laffer curve assumes that no tax revenue is raised at the extreme tax rates of 0% and %, and that there is a tax rate between 0% and % that maximizes government tax revenue.

Distortionary Taxation, Debt, and the Price Level Article in Journal of money credit and banking 41(1) February with 45 Reads How we measure 'reads'. and corporate taxation and introduces one for the consumption tax. Although higher tax rates raise additional tax revenue, the economic costs of higher distortionary tain xation terms of output contraction are substantial.

JEL classification: E62, H20, H30 Keywords: Fiscal limits, distortionary taxes, Laffer curve, informal sectorCited by: 6.

Under distortionary taxation, this classification is no longer relevant. Nominal determinacy is always ensured since distortionary taxes establish a link between the allocation and the sequences of taxes and debt and, hence, the price level, regardless of Cited by:   The Laffer Curve shows tax revenue, which is only a poor proxy for economic activity.

There's undoubtedly economic loss from every cent of tax (though liberals would argue, at. The Laffer Curve, which is sometimes called the Laffer-Khaldun Curve, is a theoretical relationship between the money a government raises through taxation and all possible rates of taxation.

The underlying hypothesis behind the Laffer Curve is that if tax rates are 0%, no money will be raised, and if tax rates are %, no money will be raised because people will refuse to work or they will.

Title: The Macroeconomic Effects of Distortionary Taxation Author: Ellen R. McGrattan Created Date: 2/24/ PM. The Laffer curve epitomizes the distinction between tax rates and total receipts by plotting them against each other. The two endpoints are easy enough to calculate.

At a tax rate of 0 percent, the government will collect $0 in tax receipts. The story of how the Laffer Curve got its name begins with a article by Jude Wanniski in The Public Interest entitled, "Taxes, Revenues, and. In economics, the Laffer curve is a theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation.

It is used to illustrate the concept of taxable income elasticity (that taxable income will change in response to changes in the rate of taxation). The interest rate setting policy of the central bank influences the amount of funds the government must raise to pay the interest on its existing debt.

With distortionary taxation, fiscal. the Laffer curve is and its implications for economic policy. In its most general form, the Laffer curve depicts the relationship between tax rates and the revenue the government receives–that is, a single tax rate exists that maximizes the amount of revenue the government obtains from taxation.

Figure 1 below represents a graphical depiction File Size: KB. Downloadable (with restrictions). The paper presents the fiscal theory of the price level in a variety of models, including endowment economies with lump-sum taxes and production economies with proportional income taxes.

We offer a microeconomic perspective on the fiscal theory by computing a Slutsky-Hicks decomposition of the effects of tax changes into substitution, wealth, and revaluation.

Figure 1. Debt Laffer curve. THE DEBT LAFFER CURVE roo e0 r 60 40 20 pgena Uruguay go Colombia cnile PniI,ppne sOIOCCO Yugoslavia Venezuela exico Jamaica razll C"9 Poland d'IVOire Panama Dominican Honduras \eria Republic Arg 6 Debt-la-Expod (, logs/ 7 8 Figure 2.

Secondary market prices, DecemberHlCs and by: Start studying Chapter 29 Fiscal Policy. Learn vocabulary, terms, and more with flashcards, games, and other study tools.

Search. Government debt to debt ratio. Government debt:Real GDP. If an economy lies to the right of the maximum point on the Laffer curve, than a cut in tax rate.

Downloadable. This paper studies how the presence of an income tax changes the properties of general equilibrium models. It fi nds that relative to the previous literature [following Leeper ()] a new area of determinacy exists where a passive fiscal rule combined with a passive monetary rule can still deliver determinacy where the same area of the parameter space would lead to multiple.

The Laffer Curve is a (supposed) relationship between economic activity and the rate of taxation which suggests there is an optimum tax rate which maximises total tax revenue.

tutor2u Subjects Events Job board Shop Company Support Main menu.ECON - Ch - Using Fiscal Policy - Section 2 - Demand- Side and Supply-Side Policies. Terms in this set (9) Keynesian Economics. Which fiscal policy tool does the Laffer Curve address?

It focuses on taxation namely the way in which higher tax rates may decrease tax revenues. Liberals claim that the Laffer Curve has been discredited, and that tax cuts don’t pay for themselves.

OK, how about a $ trillion supply-side tax cut that fully pays for itself before it even Author: Louis Woodhill.