Taxes, Loans and Inflation How the Nation's Wealth Becomes Misallocated
Income from capital receives uneven treatment in both the tax system and the loan markets. This affects almost every investment decision make by the individuals, business, and government and causes major disruptions in the economy. In this book C. Eugene Steuerle shows how the misallocation of capital results from the interaction of tax laws, the operation of the market for loanable funds, and inflation. He first analyzes the taxation of capital income, focusing on the distortions caused by tax arbitrage and on inflation-induced discriminations among both taxpayer and borrowers. The author the
1 online resource (220 p.).
9780815721031, 081572103X
1389612931
Cover
Contents
1. Introduction
Accounting for Economic Income
The Treatment of Saving and Investment
The Treatment of New and Old Wealth
The Plan of the Book
PART ONE: THE ALLOCATION OF CAPITAL
2. Taxation of the Capital Income of Individuals
Income Subject to Tax
Assets and Liabilities of Individuals
Some Implications
3. Taxation of Corporate Income
Corporate Tax Collections
Postwar Changes in the Corporate Tax Structure
Variations in Tax Rates
Some Implications
4. Flows of Interest and Loan Markets
Interest as a Measure of Income Tracing Interest Payments and Receipts
Relation between the Interest Rate and the Tax Base
Taxes Paid on Interest Income
5. Tax Arbitrage
The Special Case of Interest
Types of Tax Arbitrage
Some Implications of Normal Tax Arbitrage
Some Implications of Pure Tax Arbitrage
Specific Cases of Tax Arbitrage
Limits on Tax Arbitrage
6. Financial Arbitrage
Reverse Arbitrage
Asymmetric Tax Treatment
Financial Arbitrage in the Real World
Limits on Financial Arbitrage
Interest Rates and Returns from Real Assets
Tax Arbitrage versus Financial Arbitrage 7. The Effects of Inflation
Inflation Neutrality
Inflation and Tax Arbitrage
The Profitability of Unproductive Investment
Cash Flow and Inflation
PART TWO: INTERPRETING SOME CURRENT EVENTS
8. Limitations of Macroeconomic Policy Initiatives
The Assumption of Inflation Neutrality
Current Limitations on the Effectiveness of Macro Policy
9. Limitations of Existing Incentives for Saving and Investment
Incentives for Saving
Incentives for Investment
10. Effects on Organizational Structure
Mergers, Conglomeration, and Divestitures
Leasing of Equipment The Cost of Human Resources
11. Some Equity and Supply-Side Considerations
Issues of Equity
Supply-Side Economics and Feedback Effects
PART THREE: PRESCRIPTIONS FOR THE ECONOMY
12. Prescriptions for Major Tax Reform
Efficiency Conditions
Broader-Base, Lower-Rate Income Taxes
Flat-Rate Taxes
Indexing
Comprehensive Expenditure Taxes
Reductions in Tax Rates
Summary
Appendix: Mathematical Representation of Efficiency Conditions for Taxation of Capital Income
13. Other Prescriptions
Additional Supplies of Loanable Funds
Credit Controls Financial Innovation
A Commodity-Based Money Supply
Summary
14. Conclusion: An Agenda for Reform
Index
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