Phased-ln Tax Cuts and Economic Activity

摘要

Legislating predictable changes in tax rates violates one of the cardinal principles of public finance: changes in tax rates should be permanent and immediate. Taxation typically distorts economic behavior and, because the deadweight burden of taxation is a convex function of the tax rate, there are efficiency gains to equalizing tax rates over time. As Robert J. Barro (1979) argues, this logic implies that changes in tax rates should be unpredictable, that is, tax rates should follow random walks.