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A General Equilibrium Analysis of a Reduction in Capital Gains Taxes

Author

Listed:
  • Barry J. Seldon

    (University of Texas at Dallas)

  • Roy G. Boyd

    (Ohio University)

Abstract

The authors analyze the general equilibrium effects of reducing capital gains taxes in a computable general equilibrium (CGE) model. The CGE approach allows the examination of the impact of the tax reduction on the various sectors of the economy. Of special interest is the distributive effects of the tax reduction, measured in this study by the changes in income and utility among six income classes. Positive gains are enjoyed in all six income classes, with the highest percentage increases going to the lowest income class. Of 14 consumption sectors, the largest percentage increase is in savings. This bodes well for future economic growth.

Suggested Citation

  • Barry J. Seldon & Roy G. Boyd, 1995. "A General Equilibrium Analysis of a Reduction in Capital Gains Taxes," Public Finance Review, , vol. 23(2), pages 193-216, April.
    • Handle: RePEc:sae:pubfin:v:23:y:1995:i:2:p:193-216
    DOI: 10.1177/109114219502300204
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    References listed on IDEAS

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    2. Gerald E. Auten & Joseph J. Cordes, 1991. "Policy Watch: Cutting Capital Gains Taxes," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 181-192, Winter.
    3. Roy Boyd & David H. Newman, 1991. "Tax Reform and Land-Using Sectors in the U.S. Economy: A General Equilibrium Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(2), pages 398-409.
    4. Summers, Lawrence H, 1981. "Capital Taxation and Accumulation in a Life Cycle Growth Model," American Economic Review, American Economic Association, vol. 71(4), pages 533-544, September.
    5. Whalley, John & Yeung, Bernard, 1984. "External sector closing rules in applied general equilibrium models," Journal of International Economics, Elsevier, vol. 16(1-2), pages 123-138, February.
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    8. Roy Boyd & Barry J. Seldon, 1991. "Revenue and Land-Use Effects of Proposed Changes in Sin Taxes: A General Equilibrium Perspective," Land Economics, University of Wisconsin Press, vol. 67(3), pages 365-374.
    9. Thomas Rutherford, 1987. "A Modeling System for Applied General Equilibrium Analysis," Cowles Foundation Discussion Papers 836, Cowles Foundation for Research in Economics, Yale University.
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    11. Hendershott, Patric H. & Toder, Eric J. & Won, Yunhi, 1991. "Effects of Capital Gains Taxes on Revenue and Economic Efficiency," National Tax Journal, National Tax Association;National Tax Journal, vol. 44(1), pages 21-40, March.
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