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The objective of this review is to investigate the short- and long-term effects of osteopathic manipulative techniques (OMT) on cardiovascular function and its regulators in the nervous and endocrine systems compared to passive and active controls.A variety of pharmacological and lifestyle-based treatments are used to prevent or treat vascular diseases, yet vascular disease underpins the top 2 causes of death worldwide. There is a need for more preventative and therapeutic interventions in the management and prevention of vascular disease that are compatible with existing interventions. OMT has shown promise as a non-invasive approach to improve cardiovascular function, but it is currently utilized mostly for alleviating musculoskeletal symptoms. A comprehensive summary of the evidence for the effectiveness of OMT effects on cardiovascular function will assist clinicians and guide future research directions.This review will consider randomized controlled trials, non-randomized controlled trials, and crossover studies. Participants must have received OMT intervention. Comparators will include passive or active controls, including controls for body position, touch, and other potential interventions for vascular disease. Cardiovascular, nervous-system, or endocrine-system outcome variables must be measured at least 1 time after treatment. Adverse events will also be considered.Searches will be conducted in the following databases: MEDLINE (PubMed), the Journal of Osteopathic Medicine, Embase, Scopus, ProQuest One Academic, MedNar, the International Journal of Osteopathic Medicine, and CINAHL (EBSCO). Studies available in English, without date restrictions, will be considered for inclusion. Relevant studies will be selected by 2 independent reviewers, critically appraised, and extracted using a tool customized for the details of the study. If meta-analysis is possible, evidence will be summarized using standard techniques with subgroup analyses providing more insight into particular OMT techniques, timeframe of the treatment, and duration of effects, among others. Certainty of findings will be presented using GRADE.PROSPERO CRD42021225838.

This paper estimates the effective tax rate on entrepreneurial income, defined as the return to an individual who starts a successful new business and then sells their interest once it becomes an e...

Harry Grubert made important contributions to our thinking about international tax policies. He identified the numerous margins on which corporate tax systems could distort behavior in a global eco...

The Tax Cuts and Jobs Act of 2017 was the largest tax overhaul since 1986. Our assessment — based on a variety of sources — suggests that the act will do the following: stimulate the economy in the...

A longstanding concern of state and local governments is that a federal value-added tax (VAT) could severely limit their reliance on sales taxes. But a federal VAT could have even larger effects on...

This paper examines the Tax Cuts and Jobs Act (TCJA) of 2017, the largest tax overhaul since 1986. The new tax law makes substantial changes to the rates and bases of both the individual and corporate income taxes, cutting the corporate income tax rate to 21 percent, redesigning international tax rules, and providing a deduction for pass-through income. TCJA will stimulate the economy in the near term. Most models indicate that the long-term impact on GDP will be small. The impact will be smaller on GNP than on GDP because the law will generate net capital inflows from abroad that have to be repaid in the future. The new law will reduce federal revenues by significant amounts, even after allowing for the modest impact on economic growth. It will make the distribution of after-tax income more unequal, raise federal debt, and impose burdens on future generations. When it is ultimately financed with spending cuts or other tax increases, as it must be in the long run, TCJA will, under the most plausible scenarios, end up making most households worse off than if TCJA had not been enacted. The new law simplifies taxes in some ways but creates new complexity and compliance issues in others. It will raise health care premiums and reduce health insurance coverage and will have adverse effects on charitable contributions and some state and local governments. Looking forward, the ultimate effects of TCJA will depend on the currently uncertain responses of other countries, the Federal Reserve Board, and future Congresses, among others.

We review the changing economic significance of various business entity types since the Tax Reform Act of 1986 (TRA86) and the implications of these changes for the design of tax policy. In particu...

This paper evaluates six options to achieve across-the-board reductions to a group of major exclusions and deductions in the income tax: (1) limiting their tax benefit to a maximum percentage of in...

The 2008 stock market crash raises concerns about retirement security, especially since the increased prevalence of 401(k) and similar retirement saving plans means that more Americans are now stakeholders in the equity market than in the past. Using a dynamic microsimulation model, this paper explores the ability of alternate future stock market scenarios to restore retirement assets. The authors find that those near retirement could fare the worst because they have no time to recoup their losses. Mid-career workers could fare better because they have more time to rebuild their wealth. They may even gain income if they buy stocks at low prices and get above-average rates of return. High-income groups will be the most affected because they are most likely to have financial assets and to be invested in the stock market.

Tax expenditures measure the cost of spend? ing programs run through the tax system. In preparing their annual lists, the Office of Management and Budget (OMB) and Congress's Joint Committee on Taxation (JCT) define tax expenditures as deviations from the "normal" individual and corporate income tax bases. OMB has recently also listed tax expenditures measured against consumption tax and compre? hensive income tax bases. Tax expenditures are "static," meaning that they assume no change in economic behavior if they are eliminated. Tax expenditure estimates may thus be much larger than revenue estimates for eliminating a par? ticular provision. The measurement of tax expenditures is controversial, mainly because there is no com? monly agreed tax baseline against which to measure departures. In spite of this and other measurement issues, most public finance econo? mists believe that measuring tax expenditures is an important part of good budget management because tax benefits can have the same effect on beneficiaries as direct spending programs, and impose similar opportunity costs in terms of higher taxes, reduced federal spending, and higher deficits. We should assess their effects on the federal budget and on achieving program objectives the same way we assess direct spend? ing programs. Non-business tax expenditures?the focus of this paper?are large relative to the size of the economy and to total tax revenues.1 They rose sharply between 1976 and 1985, from 4.2 to 6.4 percent of GDP. They dropped between 1985 and 1990 as a result of the Tax Reform Act of

During the 1990s, US income-transfer and tax policies shifted towards trying to encourage work among low-income families. Optimal tax theory, however, suggests that work subsidies are usually an inefficient way to raise the incomes of poor families unless the work effort of recipients has external benefits and/or taxpayer/voters prefer redistributing income to the working poor rather than the idle poor. This paper discusses the conditions under which work subsidies may be economically efficient and assesses empirical evidence suggesting that welfare reform and expansions of the EITC have increased work effort among low income families, but is inconclusive about whether the policy shift has enabled them to advance beyond entry-level jobs or benefited their children.

In recent years, the percentage of individual taxpayers using paid preparers and software has increased, while the share of taxpayers who self–prepare without software has dropped sharply. Using the Individual Taxpayer Burden Model developed by IBM Business Consulting Services for the IRS, we simulate the effects of preparation method on time and money costs of preparing tax returns. When we correct for self–selection bias, we find that each group on average selects the preparation method that costs the least for them. For example, software costs more than self–preparation for current self–preparers, but costs less than self–preparation for current software users.

This paper focuses on the design, development, and use of the Individual Taxpayer Burden Model (ITBM)— a microsimulation model developed jointly by IBM and the 1RS to estimate the amount of time an...

The case for a carbon tax is strong. A well-designed tax could efficiently reduce the emissions that cause climate change and encourage innovation in cleaner technologies. The resulting revenue could finance tax reductions, spending priorities, or deficit reduction — policies that could offset the tax’s distributional and economic burdens, improve the environment, or otherwise improve Americans’ well-being. But moving a carbon tax from the whiteboard to reality is challenging. To help policymakers, analysts, and the public address those challenges, this report examines the what, why, and how of implementing a carbon tax and using the revenue it would generate.

The United States has a worldwide system that taxes the dividends its resident multinational corporations receive from their foreign affiliates, while most other countries have territorial systems that exempt these dividends. This report examines the experience of four countries – two with long-standing territorial systems and two that have recently eliminated taxation of repatriated dividends. We find that the reasons for maintaining or introducing dividend exemption systems varied greatly among them and do not necessarily apply to the United States. Moreover, classification of tax systems as worldwide or territorial does not adequately capture differences in how countries tax foreign-source income.

This Tax Fact explores the distributional impact of taxing carbon dioxide to combat climate change and in recycling the revenues into tax cuts.

Background and Purpose: Cranial manipulations (CM) as a part of osteopathic manipulative treatment have been used to treat patients. However, physiological responses to CM are not well defined in literature. The purpose of this study was to measure changes in heart rate (HR), heart rate variability (HRV), stroke volume index (SI), and cardiac index (CI) in response to selected CM and sham manipulation. Method: Healthy 25-35 year old men participated in this study. Non-invasive impedance cardiography method was used to measure changes in cardiac parameters before and after manipulations. Data were recorded and analyzed using BIOPAC Systems, Inc. equipment and software. All manipulations were performed by the same osteopathic physician. Results: CM increased parasympathetic input (70%) to the heart resulting in decreased HR (5%) and CI (7%) without significant effect on SI. These changes were not seen in sham manipulation. Conclusion: Selected CM decreased CI by decreasing HR without significant effect on c...

The use of tax incentives instead of direct spending to promote social and economic goals is growing. This paper consid- ers whether it matters if fiscal interventions take the form of direct spending or tax breaks. Tax breaks can, and increasingly do, re- place spending programs with the same effects on resource alloca- tion and income distribution. Costs of administration may differ between them, however, depending on program design features. While the choice between the two must be made on a case-by-case basis, the increased use of the tax system for social policy raises broader concerns about political accountability.

Increased labor force participation of the elderly can reduce the fiscal and economic stress from the projected aging of the population in the next century. This paper uses Survey of Income and Program Participation data matched with longitudinal earnings histories and Social Security benefit records to estimate joint work and benefit receipt choices for people age 62 and over. The probability of working is shown to depend on both worker characteristics and policy variables, with lower Social Security benefits and lower tax rates on wages both modestly increasing labor force participation of older workers.

A carbon tax is a promising tool for discouraging the greenhouse gas emissions that cause climate change. In principle, a well-designed tax could reduce the risk of climate change, minimize the cost of emissions reductions, encourage innovation in low-carbon technologies, and raise new public revenue. But designing a real-world carbon tax poses significant challenges. We analyze those challenges from a public finance perspective, emphasizing three tax policy design issues: setting the tax rate, collecting the tax, and using the resulting revenue. The benefits of a carbon tax will depend on how policymakers address those issues.

It is widely recognized that the current U.S. corporate income tax is flawed, particularly in its treatment of foreign‐source income. These flaws are amplified by the high U.S. statutory tax rate. Unfortunately,current reform proposals fail to resolve the fundamental contradictions in the current corporate income tax structure.The current system and the reform proposals attempt to base corporate taxation on the source of the corporate income, the residence of the corporation, or a combination of those two factors. The problem is that neither source nor corporate residence can be easily defined. Any viable reform must either find an agreed‐upon way to define those terms or must restructure the tax system in a way that avoids the need to define them.In this report, we describe the challenges facing the corporate income tax and discuss two structural reform options that could address them. One option would seek international agreement on how to allocate income of multinational corporations among countries. The other option would eliminate the corporate income tax, but would tax American shareholders of publicly traded companies at ordinary income tax rates on their dividends and accrued capital gains. We discuss the benefits and limitations of each option.

The inclusion of employer-sponsored health insurance (ESI) in taxable income would increase income and payroll tax receipts, but would also increase Old Age, Survivors, and Disability Insurance (OASDI) benefits by adding ESI to the OASDI earnings base. This study uses the Urban Institute’s DYNASIM model to estimate the effects of including ESI premiums in taxable earnings on the level and distribution by age and income groups of income tax burdens, payroll tax burdens, and OASDI benefits. We find that the increased present value of OASDI benefits from including ESI in the wage base in 2014 offsets about 22 percent of increased income and payroll taxes, 57 percent of increased payroll taxes, and 72 percent of increased OASDI taxes. The overall distributions of taxes and benefits by income group follow the same pattern, with both taxes and benefits increasing as a share of income between the bottom and middle quintiles and then declining as a share of income for higher income taxpayers. But households in the bottom income quintiles receive a net benefit from including ESI in the tax base because their increase in OASDI benefits exceeds their increase in income and payroll taxes. Over a lifetime perspective, all earnings groups experience net tax increases, but workers in the middle of the earnings distribution experience the largest net tax increases as a share of lifetime earnings. Higher benefits offset a larger share of tax increases for lower than for higher income groups.

Measuring the size of government is not simple. Standard measures omit important aspects of government action such as the many deductions, credits, and other tax preferences used to influence resource allocation. We argue that many tax preferences are effectively spending. Traditional measures of government size thus understate both spending and revenues. Reductions in spending-like tax preferences are tax increases in traditional budget accounting but are effectively spending reductions; increasing marginal tax rates raises both taxes and spending in our expanded measure. Some tax increases thus reduce government, while others expand it.

The federal government is larger than conventional budget measures suggest. Many tax preferences are effectively spending programs. Adding these spending-like tax preferences to federal outlays and receipts makes the government appear about 4 percent of GDP larger. The 1986 tax reform cut these benefits, but they have since rebounded to a larger share of GDP than before. Using this broader measure of government size, many base-broadening reforms viewed as tax increases would be reclassified as spending cuts. Raising marginal tax rates would be recorded not only as a tax increase but also as a spending increase because it would boost the value of many tax preferences. Cutting tax preferences can thus reduce the size of government, while raising tax rates would increase it. Treating user fees as government receipts rather than negative spending, finally, leads to similar changes in measures of government size.

The increase in international capital mobility over the past two decades has put pressure on the tax treatment of corporate equity income. Corporate-level taxes distort investment flows across locations and create opportunities for tax avoidance by shifting income across jurisdictions. Outward flows of capital shift part of the burden of the corporate-level tax on equity income from capital to labor, thereby making its incidence less progressive. Individual-level taxes on corporate equity income lower the after-tax return to savings but have less distorting effects on investment location and are more likely to fall on owners of capital than workers. This logic suggests there may be both efficiency gains and increases in progressivity from shifting taxes on corporate equity income from the corporate to the shareholder level. We estimate the distributional effects of a tax reform that raises shareholder-level taxes on corporate equity income and uses the revenue to cut the corporate tax rate. We find that taxing capital gains and dividends as ordinary income (subject to a maximum 28% rate on long-term capital gains) would finance a cut in the corporate tax rate from 35% to about 26%, assuming no behavioral response. While the distributional effect depends on what one assumes about the incidence of the corporate income tax, our results suggest that even if the corporate income tax were paid entirely by capital income, the reform would make the tax system more progressive.

Economists frequently assume that employees “pay for” employer-provided fringe benefits, such as contributions to retirement plans, in the form of reduced wages. Because low-income employees receive little tax benefit from saving in qualified retirement plans, however, and may prefer immediate consumption to additional retirement accruals, they may not be willing to accept a one dollar reduction in their wage in return for an additional dollar contributed to their 401(k) plan, while high income workers may be willing to give up more than a dollar in wages to get the tax benefit.

The value of the tax preference for pensions depends on the marginal tax schedule and on the tax treatment of income from assets held outside a pension account. We examine the change over time in the value of pension investing, accounting for changes in the tax schedule and in the treatment of equity and bond income. We find that changes in U.S. tax law, especially the treatment of equity income, have led to sizeable changes in the value of the pension tax preference. On balance the value of the pension tax preference to worker-savers is modestly lower than it was in the mid-1980s and substantially lower than it was in the late 1980s.

The long-term shift in coverage from defined benefit (DB) pensions to defined contribution (DC) plans may accelerate rapidly as more large companies freeze their DB pensions and replace them with new or enhanced DC plans. This paper uses the Model of Income in the Near Term to simulate the impact of an accelerated transition from DB to DC pensions on the distribution of retirement income among boomers. A scenario in which employers freeze all remaining private sector DB plans and a third of all state and local plans over the next five years will on balance produce more losers than winners among boomers and reduce their average incomes at age 67. Income changes will be largest among higher-income boomers, who have the highest DB coverage rates and projected pension incomes. Furthermore, the numbers of winners and losers and net income changes are much greater for the last wave of boomers (born between 1961 and 1965) than for earlier boomers. Younger boomers are most likely to have their DB pensions frozen with relatively little job tenure and to lose their high accrual years for DB pension wealth, but also to have relatively more years to accumulate DC pension wealth before retirement...

timates from the literature to simulate the effective tax rate on assets that produce effects on tax revenue and economic effi- capital gain than on assets that produce ciency of a 15 percent maximum tax rate ordinary income. This distorts the choice on capital gains. In estimating efficiency among assets, leading to overinvestment effects, marginal income tax rates are ad- in gains-producing assets, and induces justed to hold tax revenue constant. The investors to incur transactions costs to results depend on the responsiveness of convert ordinary income to capital gain. capital gains realizations and corporate One important source of conversion of dividend payouts to their respective tax income to capital gain is the substitution prices. With payouts fixed, efficiency in- of corporate retained earnings for divicreases but revenue declines except with the dend payouts. Households may prefer divhighest estimated realizations response. idends to retained earnings because such With payouts endogenous, revenue de- payouts convey useful information and clines. The s@gnof the efficiency change increase shareholder control of the firm.' depends on the realizations response. The higher effective tax rate on dividends than on retained earnings, however, reNDER the U.S. income tax, as in most duces the desired payout rate. The optiUOECD countries, capital income that mal payout rate is one at which the inpeople accrue in the form of increases in formation (and other) benefits of an extra asset values (capital gains) is taxed only dollar of dividends to shareholders exwhen the gain is realized by sale or ex- actly equals the marginal net tax costs of payouts to the weighted average share

This report describes the work the Urban Institute performed to generate the Model of Income in the Near Term, Version 5 (MINT5). MINT is a tool developed for The Division of Policy Evaluation (DPE) of the Social Security Administration (SSA) to analyze the distributional consequences of Social Security reform proposals. MINT is a micro-level data file of individuals born between 1926 and 2018. It starts with a rich set of income and demographic characteristics from the 1990 to 1996 Survey of Income and Program Particpation (SIPP) data linked to SSA data on earnings and benefits. MINT then projects these characteristics until death or the year 2099.

This article presents three measures of the distribution of actual and projected net benefits (benefits minus payroll taxes) from Social Security's Old-Age and Survivors Insurance (OASI) for people born between 1931 and 1960. The results are based on simulations with the Social Security Administration's Model of Income in the Near Term (MINT), which projects retirement income through 2020. The base sample for MINT is the U.S. Census Bureau's Survey of Income and Program Participation panels for 1990 to 1993, matched with Social Security administrative records. The study population is grouped into 5-year birth cohorts and then ranked by economic status in three ways. First, the population is divided into five groups on the basis of individual lifetime covered earnings, and their lifetime present values of OASI benefits received and payroll taxes paid are calculated. By this measure, OASI provides much higher benefits to the lowest quintile of earners than to other groups, but it becomes less redistributive toward lower earners in more recent birth cohorts. Second, people are ranked by shared lifetime covered earnings, and the values of shared benefits received and payroll taxes paid are computed. Individuals are assumed to split covered earnings, benefits, and payroll taxes with their spouses in the years they are married. By the shared covered earnings measure, OASI is still much more favorable to persons in the lower income quintiles, although to a lesser degree than when people are ranked by individual covered earnings. OASI becomes more progressive among recent cohorts, even as net lifetime benefits decline for the entire population. Finally, individuals are ranked on the basis of their shared permanent income from age 62, when they become eligible for early retirement benefits, until death. Their annual Social Security benefits are compared with the benefits they would have received if they had saved their payroll taxes in individual accounts and used the proceeds to buy either of two annuities that provide level payments from age 62 until death: a unisex annuity that is based on the average life expectancy of the birth cohort or an age-adjusted annuity that is based on the worker's own life expectancy. On the permanent income measure, OASI is generally more favorable to people in higher income quintiles. Moreover, it is particularly unfavorable to those in the lowest quintile. Because people in the lowest quintile have a shorter life expectancy, they receive OASI benefits for a shorter period. This group would receive greater benefits in retirement if they invested their payroll taxes in the age-adjusted annuity. OASI is more favorable to them than the unisex annuity, however, OASI is becoming more progressive in that the net benefits it provides drop more rapidly among higher income quintiles than lower ones. This article also examines how OASI affects individuals by educational attainment, race, and sex. On both the lifetime covered earnings and the permanent income measures, OASI is more favorable to workers with less education and more favorable to women. The results by race and ethnicity are mixed. When people are ranked by the present value of their shared lifetime covered earnings, OASI appears more favorable to non-Hispanic blacks and Hispanics than to non-Hispanic whites. When people are ranked by shared permanent income in retirement, however, OASI produces negative returns for both non-Hispanic blacks and non-Hispanic whites in the most recent birth cohorts, with non-Hispanic blacks faring relatively worse. The changes across cohorts occur partly because of changes in tax rates and benefits, but more importantly because of changing demographics and earnings patterns of the workforce. Of particular importance is the increasing share of beneficiaries who receive worker benefits instead of auxiliary benefits as wives or widows. OASI benefits are based on the lifetime covered earnings of current or former married couples, as well as on earned retirement benefits of individuals. The reduced importance of auxiliary benefits (due to the higher lifetime covered earnings of women) and the increased proportion of divorced retirees make OASI more progressive--even as net benefits decline--for current and future cohorts than for cohorts who retired in the 1990s. Analysis of these findings suggests that simulations of policy changes in Social Security must take into account the decreasing importance of auxiliary benefits across birth cohorts and the complex changes in individuals' marital histories.

This paper by the Urban Institute explores the impact of the RET on individual behavior. The RET may affect two personal decisions: (1) how many hours to work (including leaving the workforce); and (2) at what age to start claiming Social Security benefits. The RET may discourage a certain group of older citizens from working. This is the group of workers aged 62 to 64 who already receive Social Security benefits and who have labor income just below the RET or between the RET threshold and the point at which the RET completely taxes away the individual’s Social Security benefit. Higher earners may be affected in the opposite direction: removing the RET would allow them to receive Social Security benefits for the first time, and this might lead some high earners to cut back on their work hours. The RET may also discourage workers from taking up Social Security benefits at ages below the NRA, because it temporarily taxes away some part of Social Security benefits. These behavioral questions have important implications for the present, and future, total incomes of workers between the ages of 62 and 64 who may be subject to the RET. The goal of this paper is to examine these potential behavioral changes and the relative importance of work effort and Social Security take-up decisions to total income levels.

This paper analyzes the factors that may be related to increased or decreased poverty among the 62- to 89-year-old population in 2020 using the Social Security Administration's Model of Income in the Near Term (MINT). The authors find that price-adjusted poverty is projected to decline from 7.8 percent in the early 1990s to 4.2 percent in 2020, but that wage-adjusted poverty is projected to increase from 7.8 percent to 9.9 percent. The increase in the normal retirement age and changes in marital composition each explain about 25 percent of the projected increase in wage-adjusted poverty. The changes in the relative earnings of men and women did not affect the poverty rate—it only affected who was in poverty. The rise in earnings inequality had almost no effect on poverty rates largely because of the progressive Social Security payment formula.

Introduction Since 1980 there have been major changes in federal tax policy. The U.S. Congress enacted five major tax bills: the Economic Recovery Tax Act of 1981 (ERTA), the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), the Deficit Reduction Act of 1984 (DEFRA), the Tax Reform Act of 1986 (TRA), and the Omnibus Budget Reconciliation Act of 1990 (OBRA). Congress also had previously enacted the Social Security Amendments of 1977, which increased payroll tax rates throughout the decade, and later enacted the Social Security Amendments of 1983, which accelerated the effective date of those increases and made a portion of social security benefits taxable under the individual income tax. These changes in the law have resulted in a much different tax structure today than the law in effect in 1980. The income-tax rate schedule is lower and flatter, and many tax preferences under the individual income tax have been scaled back or eliminated. The top corporate tax rate is lower, but the investment tax credit has been eliminated and other business investment incentives, which were expanded in ERTA, were subsequently scaled back. The base for payroll taxes is wider and rates are higher. Some excise-tax rates are higher today than at the beginning of the decade, offsetting in part the decline in the real value of excise-tax rates with inflation.

This paper uses a general equilibrium model to simulate both the effects of a preferential capital-gains tax rate on total income tax revenues and the effects of a revenue-neutral substitution between a capital gains preference and marginal income tax rates on economic efficiency and the distribution of income. In the simulations, a capital gains preference increases efficiency by reducing tax distortions between untaxed assets (household and state and local capital) and taxable business sector assets and between realized and unrealized capital gains (the "lock-in" effect), but reduces efficiency by increasing tax distortions between corporate dividends and retained earnings and between financial assets that produce capital gain income and those that produce ordinary income. Because the model treats aggregate factor supplies as fixed, however, the simulations do not capture the efficiency gain from reducing the tax distortion between current and future consumption or the loss from increasing the tax distortion between current consumption and leisure (or untaxed labor). The net estimated welfare effects depend on two parameters: the elasticity of capital gains realizations with respect to a change in the capital gains tax rate and the elasticity of the dividend-payout ratio with respect to a change in the tax cost of dividends relative to retentions. With no payout response, the net welfare effect from a 15% maximum rate on capital gains is positive for a wide range of realizations elasticities. With a high payout elasticity, the net welfare effect is slightly positive for high estimates of the realizations elasticity and slightly negative for low estimates of the realizations elasticity. The welfare changes, both positive and negative, mainly affect taxpayers with income of $50,000 and over.

This paper uses a general equilibrium model to simulate both the effects of a preferential capital-gains tax rate on total income tax revenues and the effects of a revenue-neutral substitution between a capital gains preference and marginal income tax rates on economic efficiency and the distribution of income. In the simulations, a capital gains preference increases efficiency by reducing tax distortions between untaxed assets (household and state and local capital) and taxable business sector assets and between realized and unrealized capital gains (the "lock-in" effect), but reduces efficiency by increasing tax distortions between corporate dividends and retained earnings and between financial assets that produce capital gain income and those that produce ordinary income. Because the model treats aggregate factor supplies as fixed, however, the simulations do not capture the efficiency gain from reducing the tax distortion between current and future consumption or the loss from increasing the tax distortion between current consumption and leisure (or untaxed labor). The net estimated welfare effects depend on two parameters: the elasticity of capital gains realizations with respect to a change in the capital gains tax rate and the elasticity of the dividend-payout ratio with respect to a change in the tax cost of dividends relative to retentions. With no payout response, the net welfare effect from a 15% maximum rate on capital gains is positive for a wide range of realizations elasticities. With a high payout elasticity, the net welfare effect is slightly positive for high estimates of the realizations elasticity and slightly negative for low estimates of the realizations elasticity. The welfare changes, both positive and negative, mainly affect taxpayers with income of $50,000 and over.

ferent oil and gas properties are derived by computing the required profitability on new investments, given the tax laws and an assumed after-tax discount rate. Our analysis shows that oil and gas extraction is taxed more favorably than most other business activities under both current law and the law in effect prior to the Tax Reform Act of 1986 (TRA). The effective tax rate on oil and gas investments is very sensitive to characteristics of the property and of the company developing it, but it is lower than effective tax rates on other industries in all the cases we examined. The low effective tax rates on oil and gas properties result from favorable rules for recovery of capital costs. These include expensing of most intangible drilling costs and five-year recovery of the non-expensed portion; expensing of dry holes and abandoned properties; and, for non-integrated producers, percentage depletion.2 The benefits of favorable capital recovery rules are reduced to some degree by provisions of the alternative minimum taxes