I thank Alan Auerbach, Kevin Hassett, Glenn Hubbard, Alvin Rabushka, and participants of the AEI’s “The Transition Costs of Fundamental Tax Reform” for their many useful comments. I acknowledge the support of NSF grant SBR-9708991.
The Importance of Asymmetric Tax Policy and Dangers of Aggregation
Article first published online: 20 JUL 2011
© 2011 The Ohio State University
Journal of Money, Credit and Banking
Volume 43, Issue Supplement s1, pages 175–205, August 2011
How to Cite
JUDD, K. L. (2011), The Importance of Asymmetric Tax Policy and Dangers of Aggregation. Journal of Money, Credit and Banking, 43: 175–205. doi: 10.1111/j.1538-4616.2011.00414.x
- Issue published online: 20 JUL 2011
- Article first published online: 20 JUL 2011
- Received September 1, 2010; and accepted in revised form April 7, 2011.
- capital taxation;
- efficiency cost of taxation
Existing tax policies have many complex features that make distinctions across goods, factors, and financial structures that distort economic allocations. Their importance is ignored when tax policy is summarized by an “effective” tax rate. In fact, the losses due to asymmetries are often larger than the losses due to the level of taxation.