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Accrual Equivalent Marginal Tax Rates for Personal Financial Assets

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  • Graham Glenday
  • James B. Davies

Abstract

This paper shows that the appropriate approach to calculating accrual equivalent marginal tax rates for nonaccrual taxes on personal financial investments is the relative-reduction-in-the-internal-rate-of-return approach, which equates the present values from the after-tax returns from an investment under an accrual and a nonaccrual tax. Detailed comparisons are made with alternative approaches proposed by Boadway, Bruce, and Mintz (1984) and by King and Fullerton (1984) for the capital gains tax. Both find accrual tax rates that equate the present values of accrual and actual tax revenues. Fundamental problems are found with both alternative approaches.

Suggested Citation

  • Graham Glenday & James B. Davies, 1990. "Accrual Equivalent Marginal Tax Rates for Personal Financial Assets," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 189-209, February.
    • Handle: RePEc:cje:issued:v:23:y:1990:i:1:p:189-209
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    Cited by:

    1. John B. Burbidge & Kirk A. Collins & James B. Davies & Lonnie Magee, 2012. "Effective tax and subsidy rates on human capital in Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(1), pages 189-219, February.
    2. Kirk A. Collins & James Davies, 2003. "Measuring Effective Tax Rates on Human Capital: Methodology and an Application to Canada," CESifo Working Paper Series 965, CESifo.
    3. Jack Mintz, 1995. "Corporation tax: a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 16(4), pages 23-68, November.

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