How Taxes Affect Economic Behavior

By Henry J. Aaron; Joseph A. Pechman | Go to book overview

those evidenced by private ownership of public debt, may not be perceived as being on a par with other components of net worth by the private sector as a whole if higher future taxes, increased macroeconomic instability, or reduced real economic growth are expected.61. Even so, one may suspect that only weak effects can readily be swamped by changes in other potentially relevant factors that were omitted from the regressions.


Concluding Comments

This study shows that government saving habitually moves with cyclical and other factors in a well-defined pattern. Therefore, only deviations from a rule that implies government dissaving on the average but with large swings over the business cycle are treated as fiscal surprises.

In this expectational milieu the crucial distinctions are not between an automatic and a discretionary fiscal change or between a temporary and a permanent change. This allows one to dispense with labels for particular fiscal actions.62. What matters is not the labels attached to isolated policy steps but whether the resulting overall fiscal stance is consistent with the rule or off the trajectory to which it is expected to return. So long as there are no political or economic grounds for suspecting that the fiscal policy rule will change, a rational assumption is that the rule will continue to be observed and that government debt will grow indefinitely.63. Further development of the concept of the fiscal rule and its measurement may yield clearer insights than have been obtained in this study.

Additional work on other input variables may also prove rewarding. A great deal of care was lavished on the construction of the real after-tax rate-of-return variables, including accrued capital gains. Because I was dissatisfied with the common practice of picking the rate of return on a single asset, such as corporate bonds, to represent the saving incentives of households when actual household portfolios are, and must be, much

____________________
61.
For the earliest development of these points, see Franco Modigliani, "LongRun Implications of Alternative Fiscal Policies and the Burden of the National Debt," Economic Journal, vol. 71 ( December 1961), pp. 730-55.
62.
The finest recent example of the conventional piecemeal approach is Alan S. Blinder , "Temporary Taxes and Consumer Spending," National Bureau of Economic Research Working Paper 283 ( Cambridge, Mass.: NBER, October 1978).
63.
A necessary condition for the existence of a steady-growth solution is, of course, that the real government debt outstanding (including the debt implicit in net social security claims on the government) grow at the same rate as other real stocks and flows.

-368-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
How Taxes Affect Economic Behavior
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
/ 456

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.