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  • Cited by 3
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    This article has been cited by the following publications. This list is generated based on data provided by CrossRef.

    Strulik, Holger and Trimborn, Timo 2010. Anticipated tax reforms and temporary tax cuts: A general equilibrium analysis. Journal of Economic Dynamics and Control, Vol. 34, Issue. 10, p. 2141.


    Floden, Martin 2009. WHY ARE CAPITAL INCOME TAXES SO HIGH?. Macroeconomic Dynamics, Vol. 13, Issue. 03, p. 279.


    Domínguez, Begoña 2007. On the time-consistency of optimal capital taxes. Journal of Monetary Economics, Vol. 54, Issue. 3, p. 686.


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PREANNOUNCED OPTIMAL TAX REFORM

  • DAVID DOMEIJ (a1) and PAUL KLEIN (a2)
  • DOI: http://dx.doi.org/10.1017/S1365100505040204
  • Published online: 01 April 2005
Abstract

In constitutional democracies, laws take time to be deliberated upon, to be passed, and to be implemented. Motivated by this observation, we study the properties of optimal tax reform when it has to be announced in advance of its implementation. We find that a delay between announcement and implementation has large effects on the optimal fiscal policy during the transition to the new steady state. On the other hand, we find that the welfare gains from optimal tax reform are fairly robust to the introduction of an implementation lag. Increasing the lag from zero to four years reduces the welfare gains by less than a quarter. Moreover, it turns out that this reduction of the welfare gain is mainly due to the delay itself rather than the effect of preannouncement on the character of the optimal tax reform.

Copyright
Corresponding author
Address correspondence to: David Domeij, Department of Economics, Stockholm School of Economics, Box 6501, SE-113 83 Stockholm, Sweden, e-mail: david.domeij@hhs.se
Address correspondence to: Paul Klein, Department of Economics, University of Western Ontario, London, Ontario, Canada N6A 5C2, e-mail: paul.klein@uwo.ca.
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Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
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