The destabilizing effect of company income taxation

Peter A. Schmid ()
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Peter A. Schmid: Catholic University Eichstätt-Ingolstadt, School of Management, Eichstätt-Ingolstadt, Germany

Society and Economy, 2013, vol. 35, issue 3, 365-388

Abstract: This paper examines the effects of company income taxation. Therefore, a tax system is implemented in a dynamic, stochastic macroeconomic model with endogenous financial structure. In addition to the long-term level effects that are in line with the deterministic public economics literature, cyclical effects are identified. Besides insurance incidences, company income taxation implies amplifying effects. Depending on the model’s frictions, the latter can dominate and lead to more volatile business cycles.

Keywords: company income taxation; tax incidences; DSGE modeling; business cycles (search for similar items in EconPapers)
JEL-codes: E32 H22 H25 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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