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Kanniainen, Vesa
Panteghini, Paolo M.
Year of Publication: 
Series/Report no.: 
CESifo working paper 2306
This paper shows that taxes which are understood to be neutral with respect to the marginal investment decisions may be distortionary with respect to entrepreneurial decisions. In particular, we apply an intertemporal model to show that a comprehensive income tax is distortionary unless all kinds of income are subject to the same tax rate and a worker's option to become an entrepreneur is accounted for. Similarly, the harsh condition of a uniform tax rate is necessary but not sufficient under new view dividend tax, cash flow tax, and ACE tax, so that the occupational choice is not distorted. In any case, informational problems may arise and lead to distortive effects.
ACE tax
cash flow tax
dividend tax
Johansson-Samuelson theorem
real options
Document Type: 
Working Paper

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