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Effects of Dividend Relief on Economic Growth, the Stock Market, and Corporate Tax Preferences

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  • Gravelle, Jane G.

Abstract

Dividend relief was proposed for economic stimulus and growth, but is unlikely to be an effective stimulus because much of the tax benefit may be saved. Nor is it likely to affect demand independently through a rise in the stock market: these values only affect pending of stockholders (through income effects). Even if there is a separate effect on consumer or business confidence, the effect on the stock market is unlikely to be large enough to be noticeable. A deficit-financed capital income tax cut would, however, ultimately reduce the capital stock.

Suggested Citation

  • Gravelle, Jane G., 2003. "Effects of Dividend Relief on Economic Growth, the Stock Market, and Corporate Tax Preferences," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(3), pages 653-672, September.
    • Handle: RePEc:ntj:journl:v:56:y:2003:i:3:p:653-72
    DOI: 10.17310/ntj.2003.3.13
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    References listed on IDEAS

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    1. Trevor S. Harris & R. Glenn Hubbard & Deen Kemsley, 1999. "The Share Price Effects of Dividend Taxes and Tax Imputation Credits," NBER Working Papers 7445, National Bureau of Economic Research, Inc.
    2. Engen, Eric M. & Gravelle, Jane G. & Smetters, Kent, 1997. "Dynamic Tax Models: Why They Do the Things They Do," National Tax Journal, National Tax Association, vol. 50(3), pages 657-82, September.
    3. Engen, Eric M. & Gravelle, Jane G. & Smetters, Kent, 1997. "Dynamic Tax Models: Why They Do the Things They Do," National Tax Journal, National Tax Association;National Tax Journal, vol. 50(3), pages 657-682, September.
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    Cited by:

    1. Christian Keuschnigg & Martin Dietz, 2007. "A growth oriented dual income tax," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(2), pages 191-221, April.
    2. James Poterba, 2004. "Taxation and Corporate Payout Policy," American Economic Review, American Economic Association, vol. 94(2), pages 171-175, May.
    3. Richard W. Kopcke, 2005. "The taxation of equity, dividends, and stock prices," Public Policy Discussion Paper 05-1, Federal Reserve Bank of Boston.
    4. William Gale & Peter Orszag, 2005. "Economic Effects of Making the 2001 and 2003 Tax Cuts Permanent," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(2), pages 193-232, March.
    5. Randall Morck & Bernard Yeung, 2005. "Dividend Taxation and Corporate Governance," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 163-180, Summer.

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