This study investigates the welfare and macroeconomic effects of deficit-financed tax cut in Korea, which is topic of considerable interest in both policymaking and academic circles. In particular, the economy-wide effect of changes in corporate income taxation is an important question, since the burden of this tax is not necessarily borne by those upon whom they are levied. As discussed in the literature, the tax burden is shifted through changes in supply and demand behavior and thus through in all prices and quantities, in the allocation of resources, and in the distribution of after-tax incomes in the entire economy.
Using a simple overlapping generations general-equilibrium model, this study explores the long-run dynamic consequences of the recent 5%p decrease plan in corporate income tax rates in Korea, and quantifies the macroeconomic effects and intergenerational redistribution effects of such a change.
The results imply that, while the overall positive effects of corporate income tax cut on economic efficiency would be significant in Korea, policymakers could need to balance the competing policy objectives between efficiency, fiscal soundness, and intergenerational distributive equity over time.
- 감세의 경제적 효과와 재정운용(The economic effects of deficit-financed tax cut in Korea)
- 김승래; 류덕현
감세의 경제적 효과와 재정운용(The economic effects of deficit-financed tax cut in Korea)
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Economic Administration|