Nationaløkonomisk tidsskrift,
Nationaløkonomisk Forening

Abstract: The welfare gains from VAT, income tax and corporatation tax reductions are evaluated in the dynamic CGE model DREAM. The welfare gains are defined as the sum of the discounted equivalent variations for all current and future generations divided by the discounted value of the lump sum taxes necessary to finance the reduction. We find that a decrease of 5 per cent in each of the tax rates generate welfare gains in the area of 9.49 to 22.94 cents per euro of revenue loss. The different values may indicate a potential welfare gain from a change in the tax structure. However, the intergenerational distribution of the welfare gains differs significantly from one tax experiment to another. This indicates that a change in the tax structure might also generate a shift of welfare between generations. The reduction of VAT and corporatation tax increases welfare but involves a generational redistribution from future generations to current generations. In the case of an income tax cut, welfare increases, and almost all living and future households are better off.

Keywords: Velfærdseffekter; Skat; skattesænkninger; DREAM

JEL-codes: A10

Language: Danish

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