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- Title
CAPITAL TAX REFORMS WITH POLICY UNCERTAINTY.
- Authors
Ábrahám, Árpád; Brendler, Pavel; Cárceles‐Poveda, Eva
- Abstract
One important feature of capital tax reforms is the uncertainty regarding their duration. In a standard heterogeneous firm framework with financial frictions, we model policy uncertainty by assuming that reforms may be either repealed or maintained with some probability every period. We illustrate the effects of policy uncertainty in the context of the 2003 Bush tax cuts (2003 Job Growth Tax Relief Reconciliation Act), which lowered shareholder taxes. We show that policy uncertainty regarding dividend and capital gains taxes can explain why the Bush tax cuts had no statistically significant effect on investment, in line with the empirical evidence.
- Subjects
BUSH, George W. (George Walker), 1946-; FISCAL policy; CAPITAL levy; TAX cuts; CAPITAL gains; DIVIDEND policy; TAXATION; TAX reform
- Publication
International Economic Review, 2024, Vol 65, Issue 1, p75
- ISSN
0020-6598
- Publication type
Article
- DOI
10.1111/iere.12664