Dynamic scoring: Alternative financing schemes

Neoclassical growth models predict that reductions in capital or labor income tax rates are expansionary when lump-sum transfers are used to balance the government budget. This paper explores the consequences of bond-financed tax reductions that bring forth a range of possible offsetting policies, i...

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Bibliographic Details
Published inJournal of public economics Vol. 92; no. 1; pp. 159 - 182
Main Authors Leeper, Eric M., Yang, Shu-Chun Susan
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.02.2008
Elsevier
SeriesJournal of Public Economics
Subjects
Capital tax
Debt management
Dynamic scoring
Government bonds
Income tax
Labor tax
Laffer curve
Public debt
Public finance
Tax rates
Dynamic scoring
Labor tax
Debt management
Capital tax
Laffer curve
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Summary:Neoclassical growth models predict that reductions in capital or labor income tax rates are expansionary when lump-sum transfers are used to balance the government budget. This paper explores the consequences of bond-financed tax reductions that bring forth a range of possible offsetting policies, including future government consumption, capital tax rates, or labor tax rates. Through the resulting intertemporal distortions, current tax cuts can be expansionary or contractionary. The paper also finds that more aggressive responses of offsetting policies to debt engender less debt accumulation and less costly tax cuts.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0047-2727
1879-2316
DOI:10.1016/j.jpubeco.2007.04.011