The Growth and Welfare Effects of Deficit-Financed Dividend Tax Cuts

Journal Article (Journal Article)

I develop a tractable growth model that allows me to study analytically transition dynamics and welfare in response to a deficit-financed cut of the tax rate on distributed dividends. I then carry out a quantitative assessment of the Job Growth and Taxpayer Relief Reconciliation Act (JGTRRA) of 2003. I find that the Act produceslowersteady-state growth despite the fact that the economy's saving and employment ratiosrise. Most importantly, it produces a welfarelossof 19.34% of annual consumption per capita-a substantial effect driven by the fact that the steady-state growth rate falls from 2% to 1.08%. © 2011 The Ohio State University.

Full Text

Duke Authors

Cited Authors

  • Peretto, PF

Published Date

  • August 1, 2011

Published In

Volume / Issue

  • 43 / 5

Start / End Page

  • 835 - 869

Electronic International Standard Serial Number (EISSN)

  • 1538-4616

International Standard Serial Number (ISSN)

  • 0022-2879

Digital Object Identifier (DOI)

  • 10.1111/j.1538-4616.2011.00399.x

Citation Source

  • Scopus