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Collection: Faculty Working Papers  
 
Title Can Tax Cuts Pay for Themselves? An Examination of Dynamic Scoring with Public Capital
Author Stinespring, John Robert
Type of Resource text
Digital Origin born digital
Date Created 2006-10
Abstract Can a decrease in tax rates increase tax revenues? If so, to what extent? This paper builds upon recent work by Mankiw and Weinzierl (2006) on the issue by incorporating public capital into a dynamic scoring. The significant components of growth effects and transition paths, along with the conditions under which a tax cut can “pay for itself” are illustrated using the familiar Laffer curve. It is shown that the productivity of public capital and the amount of revenue allocated to public capital investment have important impacts on the growth effects, transition paths and Laffer curves. Using standard labor and capital tax rates, the growth effects are shown to offset only 1 percent of the potential revenue loss from a labor tax cut and 46 percent of the potential revenue loss from a capital tax cut. A broader measure of tax rates from Feldstein (2006) shows that growth effects can offset approximately 30 percent of the potential revenue loss from a labor tax cut and approximately 157 percent from a capital tax cut. The latter result indicates that capital tax cuts may be more than just self-financing; they may actually increase tax revenues by 57 percent.
Keywords tax
public capital
dynamic scoring
Laffer
Rights Statement Copyright restrictions apply. Contact the author for permission to publish.
Note (admin) Acquired as PDF from Colorado College Department of Economics and Business. Converted to PDF/A1.b using Adobe Acrobat Professional.
Publisher Colorado College
Place of Publication Colorado Springs, Colorado
Local Identifier 2006-05
Handle http://hdl.handle.net/10176/coccc:2623
 
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CanTaxCutsPay.pdf   master application/pdf 1.05MB 0

 
 
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Created: Thu, 14 Jan 2010, 14:41:07 MST by Christine Ashlock (admin) . Detailed History