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Does Old Capital Matter for Implementing a Pareto-Improving Tax Reform?

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  • Thomas Gaube
  • Robert Schwager

Abstract

Is it possible to replace the income tax by a consumption tax or a wage tax such that (1) a dynamic (intergenerational) Pareto improvement is obtained and (2) only the information available from enforcing the income tax is used? In this article, it is shown that such a transition is feasible if and only if in a static setting, the consumption or wage tax induces less distortions than the income tax.

Suggested Citation

  • Thomas Gaube & Robert Schwager, 2004. "Does Old Capital Matter for Implementing a Pareto-Improving Tax Reform?," Public Finance Review, , vol. 32(2), pages 220-231, March.
    • Handle: RePEc:sae:pubfin:v:32:y:2004:i:2:p:220-231
    DOI: 10.1177/1091142103261677
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    References listed on IDEAS

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