Working Paper: NBER ID: w9916
Authors: Casey B. Mulligan
Abstract: This paper accepts for the sake of argument the hypothesis that much of the time series correlation between tax and profit rates is spurious, and shows how nonetheless time series for profit rates, tax rates, and consumption can be organized, compared and interpreted using Fisher's (1930) theory of consumption in order to understand the incidence of capital taxes. Capital taxation is associated with a wedge between anticipated aggregate consumption growth and capital rental rates, suggesting that in one way or another capital owner behavior adjusts in the direction needed for some passing' of the capital tax. Conversely, most of the medium and low frequency deviations between anticipated aggregate consumption growth and capital rental rates are associated with capital taxation, as implied by aggregate time-separable Fisherian consumption theories in which time preference, non-tax capital market distortions, aggregation biases, and other determinants of aggregate consumption growth vary little over time.
Keywords: No keywords provided
JEL Codes: E21; H30; E22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Capital taxation (H29) | Anticipated aggregate consumption growth (E20) |
| Capital taxation (H29) | Capital rental rates (R31) |
| Capital taxation (H29) | Capital owner behavior adjustments (D21) |
| Anticipated aggregate consumption growth (E20) | Capital rental rates (R31) |