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Rising allowances, rising rates — Can growth arise through business income tax reform despite government debt limit?

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  • Clemens, Marius
  • Röger, Werner

Abstract

The system of business income taxation consists of two instruments, namely a statutory tax rate and a depreciation allowance on investment. We will show in this paper that by acting on both instruments simultaneously it is possible to achieve both a growth and a fiscal net revenue target even in cases when a trade-off prevails when each instrument is used individually.

Suggested Citation

  • Clemens, Marius & Röger, Werner, 2024. "Rising allowances, rising rates — Can growth arise through business income tax reform despite government debt limit?," Journal of Macroeconomics, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:jmacro:v:81:y:2024:i:c:s0164070424000211
    DOI: 10.1016/j.jmacro.2024.103606
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    More about this item

    Keywords

    Fiscal policy; Capital allowance; Capital tax; DSGE;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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