The Welfare Effects of a Capital Income Tax in an Open Economy / David G. Hartman.

Format:

Book

Author/Creator:

Hartman, David G.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1551.

NBER working paper series no. w1551

Language:

English

Subjects (All):

Investments, Foreign.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1985.

Cambridge, Mass : National Bureau of Economic Research, 1985.

Summary:

International capital mobility has typically been ignored in discussions of the welfare effects of the capital income tax. In the a typical analysis which does consider the open economy it is recognized that highly-elastic capital flows could significantly alter the usual conclusions. While there have been strenuous debates about the elasticity of international capital flows, there can be little disagreement that international ownership of capital is an important and growing phenomenon. In this paper, we explore the welfare effects of changes in the capital income tax from a different perspective: that of a country in which foreign ownership of a portion of the capital stock and foreign owners' payment of taxesis a reality. With this modification in emphasis, a simple graphical analysis is sufficient to indicate that international capital ownership could easily dominate other welfare effects of tax changes. At least, the arguments presented in this paper raise a caution about ignoring the openness of the economy simply because elasticities are believed small.

Notes:

Print version record

1985.