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- Title
The Taxation of Capital Gains When the Cash Component of Income Is Taxed.
- Authors
Swan, Peter L.
- Abstract
Does an 'income' as opposed to a 'consumption-type' or cash flow tax require a separate capital gains tax in addition to a tax on the cash component of income? Contrary to those who have adopted a Fisherian approach to this subject, the answer is shown to be 'yes'. The misunderstanding arose from the mistaken use of NPVs of tax payments to calculate effective tax rates without controlling for the taxpayer's consumption stream. The absence of a capital gains tax of an 'ideal' type initially reduces tax liabilities as systematic capital gains are artificially generated. Eventually, the horizontal inequity is converted into a tax-induced investment distortion.
- Subjects
CAPITAL gains tax; CAPITAL gains; CASH flow; LIABILITIES (Accounting); ACCOUNTING
- Publication
Abacus, 1994, Vol 30, Issue 2, p160
- ISSN
0001-3072
- Publication type
Article
- DOI
10.1111/j.1467-6281.1994.tb00348.x