This paper analyzes the intertemporal allocation effects of anticipated tax-rate changes, reconsidering the recommendations of the Meade Committee in a perfect foresight general equilibrium model of economic growth. We show that the R-base (or consumption) tax can be more distortionary than an income tax and that a revenue-neutral integration of corporate and personal taxation may lower social welfare. Moreover, we argue that a dividend tax dominates the R-base tax because it places its distortions on the financial rather than on the real side of the economy.

This paper analyzes the intertemporal allocation effects of anticipated tax rate changes, reconsidering the recommendations of the Meade Committee in a perfect foresight general equilibrium model of economic growth. It is shown that the R-base (or consumption) tax can be more distortionary than an income tax and that a revenue-neutral integration of corporate and personal taxation will lower social welfare. Moreover, it is argued that a dividend tax dominates the R-base tax because it places its distortions on the financial, rather than on the real, side of the economy.