Taxes, Public Expenditures, and Economic Development

Mitja Steinbacher

Taxes, Public Expenditures, and Economic Development

Key words: taxes, public spending, economic growth, dynamic models, tax reform

Abstract:
The author of this article shows some of the relationships between long term welfare and taxes. The aim is to compile a theoretically sound foundation with empirical investigation of impacts of taxes on welfare. The analysis brings a compilation of fundamental growth models and empirical investigations of the effects of budgetary neutral tax reform. Empirical studies favor consumption taxes before income taxes and linear taxes before progressive taxes. Comparisons of tax effects across countries need to take into account the structure of public spending and particularly the functioning of institutions that support economic development.

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