| Title |
A One-OffWealth Levy? Assessing the Pros and Cons and the Importance of Credibility |
| ID_Doc |
75568 |
| Authors |
Kempkes, G; Stähler, N |
| Title |
A One-OffWealth Levy? Assessing the Pros and Cons and the Importance of Credibility |
| Year |
2016 |
| Published |
Fiscal Studies, 37, 3-4 |
| DOI |
10.1111/j.1475-5890.2015.12062 |
| Abstract |
From an economic perspective, imposing a credibly one-off net wealth levy in times of crisis as a tool to ward off a national emergency appears to be advantageous as, in an ideal world, this would not distort market players' allocation decisions. However, in practice, charging such a levy may give rise to distortions and unwanted effects on the real economy. Credibility that the levy will be imposed as a once-only measure is key to ensuring that harmful distortions in the allocation of resources are kept to a minimum. This paper confirms this using an analysis based on a dynamic stochastic general equilibrium (DSGE) model. In practice, while a government cannot guarantee that such a measure will be taken once only, it can contribute to the credibility of this in a number of ways. First, the country's future 'business model' must become apparent; second, there has to be a basic level of confidence in the government and a firm belief that the budgetary imbalances were not actively caused by the state - at least not by the government currently in power; third, a verifiable outlook of sustainable public finances must be in place; and fourth, the political costs of a repeat levy must be high. This paper also discusses the potential impact of alternative model set-ups as well as some practical implementation problems. |
| Author Keywords |
wealth levy; credibility; public finances; dynamic stochastic general equilibrium (DSGE) models |
| Index Keywords |
Index Keywords |
| Document Type |
Other |
| Open Access |
Open Access |
| Source |
Social Science Citation Index (SSCI) |
| EID |
WOS:000388667400017 |
| WoS Category |
Business, Finance; Economics |
| Research Area |
Business & Economics |
| PDF |
https://onlinelibrary.wiley.com/doi/pdfdirect/10.1111/j.1475-5890.2015.12062
|