Capital Taxation During the U.S. Great Depression
NBER Working Paper No. 16588
Previous studies of the U.S. Great Depression find that increased taxation contributed little to either the dramatic downturn or the slow recovery. These studies include only one type of capital taxation: a business profits tax. The contribution is much greater when the analysis includes other types of capital taxes. A general equilibrium model extended to include taxes on dividends, property, capital stock, and excess and undistributed profits predicts patterns of output, investment, and hours worked more like those in the 1930s than found in earlier studies. The greatest effects come from the increased tax on corporate dividends.
A data appendix is available at http://www.nber.org/data-appendix/w16588
Document Object Identifier (DOI): 10.3386/w16588
Published: Ellen R. McGrattan, 2012. "Capital Taxation During the U.S. Great Depression," The Quarterly Journal of Economics, Oxford University Press, vol. 127(3), pages 1515-1550. citation courtesy of
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