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The Windfall Recapture Tax: Issues of Theory and Design

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  • George R. Zodrow

    (Rice University)

Abstract

The May 1985 tax reform package issued by the Reagan administration included a proposal to assess a “windfall recapture tax†on owners of existing depreciable assets; this unique proposal was one of the most controversial elements of the recommended reforms. As the first attempt to apply the principle of compensation in tax reform, the windfall recapture tax presents a host of provocative theoretical questions regarding its efficiency and equity properties, and also raises many interesting questions regarding the practical design of such a tax. This article analyzes those questions and presents theoretical and numerical analyses of alternative design approaches.

Suggested Citation

  • George R. Zodrow, 1988. "The Windfall Recapture Tax: Issues of Theory and Design," Public Finance Review, , vol. 16(4), pages 387-424, October.
    • Handle: RePEc:sae:pubfin:v:16:y:1988:i:4:p:387-424
    DOI: 10.1177/109114218801600401
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    References listed on IDEAS

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    1. Roger H. Gordon & James R. Hines, Jr. & Lawrence H. Summers, 1987. "Notes on the Tax Treatment of Structures," NBER Chapters, in: The Effects of Taxation on Capital Accumulation, pages 223-258, National Bureau of Economic Research, Inc.
    2. Feldstein, Martin, 1976. "On the theory of tax reform," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 77-104.
    3. Joseph J. Cordes & Burton A. Weisbrod, 1984. "When government programs create inequities: A guide to compensation policies," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 4(2), pages 178-195.
    4. George R. Zodrow, 1985. "Partial Tax Reform: An Optimal Taxation Perspective," Canadian Journal of Economics, Canadian Economics Association, vol. 18(2), pages 335-346, May.
    5. Patric H. Hendershott & David C. Ling, 1984. "Trading and the Tax Shelter Value of Depreciable Real Estate," NBER Working Papers 1267, National Bureau of Economic Research, Inc.
    6. Charles E. McLure, 1985. "Rationale underlying the Treasury proposals," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 29, pages 29-63.
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    Cited by:

    1. David F. Bradford, 1998. "Transition to and Tax-Rate Flexibility in a Cash-Flow-Type Tax," NBER Chapters, in: Tax Policy and the Economy, Volume 12, pages 151-172, National Bureau of Economic Research, Inc.

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