Inflation, Tax Rules, and Capital Formation | Date: 28 April 2011, 07:25
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Inflation, Tax Rules, and Capital Formation (National Bureau of Economic Research Monograph)
By Martin Feldstein
* Publisher: Univ of Chicago Pr (Tx)
* Number Of Pages: 312
* Publication Date: 1983-03
* ISBN-10 / ASIN: 0226240851
* ISBN-13 / EAN: 9780226240855
Inflation, Tax Rules, and Capital Formation brings together fourteen papers that show the importance of the interaction between tax rules and monetary policy. Based on theoretical and empirical research, these papers emphasize the importance of including explicit specifications of the tax system in such study.
Preface
The research presented in this volume combines the traditional subjects
of macroeconomics and public finance. From macroeconomics comes a
concern with the rate of interest, the capital intensity of production, and
the impact of monetary policy. From public finance comes an emphasis
on the significance of the distortionary tax rules that have generally been
ignored in macroeconomic analysis and a concern with the effects of tax
rules and monetary policy on the distribution of income and on the value
of assets. The results of this research show the importance of the interaction
between tax rules and monetary policy and the importance of including
explicit specifications of the tax system in the study of macroeconomic
equilibrium.
The book brings together fourteen papers on the subject of inflation,
tax rules, and capital formation that I wrote between 1975 and 1981. The
volume begins with a brief overview of the research and of the principal
conclusions. The first section of the volume then extends the traditional
neoclassical models of monetary growth by including specific tax and
debt-management policies. Since this is the most technical part of the
volume, I have provided in chapter 2 a less formal discussion of these
models and their implications. Subsequent sections of the book present
both theoretical and empirical investigations of the interaction between
the inflation in the United States in the 1960s and 1970s and the concurrent
tax rules. The specific chapters analyze the impact of this interaction
on effective tax rates, on the market rate of interest, on the prices of
common stock and other portfolio assets, and on business investment in
plant and equipment.
The research presented here is part of the NBER's Special Study of
Capital Formation. The work was supported by the NBER and the
National Science Foundation. I am grateful for this financial support and
also for the comments and suggestions of my colleagues and students at
the NBER and at Harvard University, especially the members of the
NBER Taxation Program and the Harvard Public Finance Seminar.
Four of the chapters were originally written with coauthors: chapter 4
with Jerry Green and Eytan Sheshinski and an appendix by Alan Auerbach,
chapter 7 with Joel Slemrod, and chapters 8 and 9 with Lawrence
Summers. I am grateful to them for their collaboration in the original
research and for their permission to include our joint papers in this
volume. Charles Horioka and James Poterba provided valuable research
assistance and Douglas Bernheim and George Sofianos rechecked all of
the equations in the volume. Judy Frink prepared the manuscript and the
bibliography for publication.
The papers in this volume reflect the evolution of my thinking over six
years. Not surprisingly, I now understand things about this subject that I
did not understand when some of these papers were written. Although
there is a temptation therefore to write a completely new and more
explicitly integrated volume, I do not believe that the improvement in the
final product would justify the delays and the extra work involved. Since I
believe that the analysis and conclusions of all of the papers are still
basically correct, I have decided not to alter any of the articles.
Although I believe that the research presented here has significant
implications for fiscal and monetary policies, in the National Bureau's
tradition I have refrained in this volume from making any specific policy
proposals. I hope that the papers in the present volume will contribute to
a wider understanding of the fundamental aspects of these issues and,
more generally, to an appreciation of the important effects of an economy's
fiscal structure on its macroeconomic performance.
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