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Why do governments issue large amounts of debt? In what sense and for whom is such a policy optimal? We show that twisting the optimal taxation paradigm produces very reasonable predictions for debt and real interest rates. Adding an extra dimension of uncertainty about the political planning horizon gives rise to a positive and very plausible government debt-to-GDP ratio of about 55 percent in a model that otherwise predicts negative government debt. We quantify the impact of political uncertainty on steady state and business cycle dynamics. We illustrate how populist tax cuts can cause business cycle fluctuations.

Debts, Public -- Econometric models. --- Fiscal policy -- Econometric models. --- Taxation -- Econometric models. --- Banks and Banking --- Public Finance --- Taxation --- Debt --- Debt Management --- Sovereign Debt --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Interest Rates: Determination, Term Structure, and Effects --- National Government Expenditures and Related Policies: General --- Fiscal Policy --- Public finance & taxation --- Welfare & benefit systems --- Finance --- Macroeconomics --- Public debt --- Labor taxes --- Real interest rates --- Expenditure --- Fiscal policy --- Debts, Public --- Income tax --- Interest rates --- Expenditures, Public --- United States --- Debts, Public. --- Political aspects.

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This paper continues the study of optimal fiscal policy in a growing economy by exploring a case in which the government simultaneously provides three main categories of expenditures with distortionary tax finance: public production services, public consumption services, and state-contingent redistributive transfers. The paper shows that in a general equilibrium model with given exogenous fiscal policy, a nonlinear relation exists between the suboptimal longrun growth rate in a competitive economy and distortionary tax rates. When fiscal policy is endogenously chosen at a social optimum, the relation between the rate of growth and tax rates is always negative. These two conclusions suggest that the interaction between fiscal policy and growth may be complicated enough that it cannot be captured in a simple linear model using an aggregate measure of fiscal policy. The sources of nonlinearity include expectation and coordination of fiscal policy, impluse response of government policies, and the presence of positive externality due to government spending.

Electronic books. -- local. --- Expenditures, Public -- Econometric models. --- Fiscal policy -- Econometric models. --- Taxation -- Econometric models. --- Political Science --- Law, Politics & Government --- Public Finance --- Expenditures, Public --- Fiscal policy --- Taxation --- Econometric models. --- Tax policy --- Appropriations and expenditures --- Government appropriations --- Government expenditures --- Government spending --- Public expenditures --- Public spending --- Spending, Government --- Government policy --- Economic policy --- Finance, Public --- Public administration --- Government spending policy --- Macroeconomics --- National Government Expenditures and Related Policies: General --- Fiscal Policy --- Aggregate Factor Income Distribution --- Taxation, Subsidies, and Revenue: General --- Public finance & taxation --- Expenditure --- Revenue administration --- Income --- Income inequality --- Revenue --- Income distribution --- Denmark

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Taxes --- 336.2 --- Fiscal policy --- -Taxation --- -AA / International- internationaal --- 334.151.3 --- 305.93 --- 336.61 --- NBB congres --- Duties --- Fee system (Taxation) --- Tax policy --- Tax reform --- Taxation, Incidence of --- Finance, Public --- Revenue --- Taxation --- Economic policy --- Belastingsakkoorden. Belastingswezen --- Econometric models --- EG : begrotings- en belastingpolitiek. --- Econometrie van het gedrag van de overheid, van de uitgaven en ontvangsten van de overheid, van de begroting. Econometrie van de belastingen. --- Financieel beleid. --- Government policy --- Econometric models. --- 336.2 Belastingen. Belastingswezen. Openbare financien. Belastingspolitiek. Belastingstheorie. Belastingsharmonisatie. Fiskale politiek. Belastingsleer. Belastingsdruk. Belastingstechniek. Belastingsstelsel.Belastingstarief --- 336.2 Belastingsakkoorden. Belastingswezen --- Belastingen. Belastingswezen. Openbare financien. Belastingspolitiek. Belastingstheorie. Belastingsharmonisatie. Fiskale politiek. Belastingsleer. Belastingsdruk. Belastingstechniek. Belastingsstelsel.Belastingstarief --- AA / International- internationaal --- Econometrie van het gedrag van de overheid, van de uitgaven en ontvangsten van de overheid, van de begroting. Econometrie van de belastingen --- EG : begrotings- en belastingpolitiek --- Financieel beleid --- Fiscal policy - Eonometric models. --- Taxation - Econometric models.

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This paper proposes a new hybrid cash-flow tax on corporations that, on one hand, taxes only excess corporate profits as they accrue, and, on the other hand, treats real and financial transactions neutrally. It is, therefore, a superior tax compared to the cash-flow tax on real transactions that seems to have gained common acceptance. The hybrid tax is a modified version of the cash-flow tax on real and financial transactions combined. The modification involves replacing expensing of fixed assets with normal depreciation allowances, but the undepreciated value of fixed assets is carried forward with interest at the opportunity cost of equity capital.

Corporations -- Taxation -- Econometric models. --- Electronic books. -- local. --- International business enterprises -- Taxation. --- Management --- Business & Economics --- Industrial Management --- Corporations --- International business enterprises --- Taxation --- Econometric models. --- Taxation. --- Business corporations --- C corporations --- Corporations, Business --- Corporations, Public --- Limited companies --- Publicly held corporations --- Publicly traded corporations --- Public limited companies --- Stock corporations --- Subchapter C corporations --- Business enterprises --- Corporate power --- Disincorporation --- Stocks --- Trusts, Industrial --- Investments: General --- Money and Monetary Policy --- Personal Finance -Taxation --- Corporate Taxation --- Criminology --- Taxation, Subsidies, and Revenue: General --- Business Taxes and Subsidies --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Illegal Behavior and the Enforcement of Law --- Investment --- Capital --- Intangible Capital --- Capacity --- Corporate & business tax --- Monetary economics --- Public finance & taxation --- Corporate crime --- white-collar crime --- Macroeconomics --- Corporate income tax --- Currencies --- Tax allowances --- Anti-money laundering and combating the financing of terrorism (AML/CFT) --- Depreciation --- Taxes --- Money --- Crime --- National accounts --- Income tax --- Money laundering --- Saving and investment --- United States --- White-collar crime