Taxation And Economic Growth, A Study Of Growth Model Regarding The Government Public Expenditures

By constructing several economic growth models with endogeous publicexpenditures, this thesis systematically exploits the relationship betweentaxation and economic growth. Its main contributions are embodied in thefollowing aspects:First, we build a growth model with a proportional tax on the grossproduct. The difference between our model and previous studies is that weintroduce the public consumptions into utility function and the publicinvestments into production function separately. Using the pontryagin'smaximum principle with constant return to scale technology, we find theformula of tax rate on the steay state.Second, we introduce increasing return to scale technology to theproportional tax model above, and find that the model can promise a persistantendogeous growth. Through the analysis of our model, we find the formula oftax rate and growth rate on the balance growth path.Based on above research, we construct a growth model with value addedtax, corporate income tax and personal income tax jointly. Through theanalysis of our model, we find the computing formula of the rates of thesethree taxes. Our study suggests that the optimal personal income tax rateequals the utility elasticity of public consumption, so if more publicconsumptions such as national defence and public medical treatments arepreferred, the government should levy more personal income taxes. For theoptimal tax rate of the value added tax and corporate income tax, we give aformula which represents their relationship. If either of these two tax rates ispredetermined, the optimal tax rate of the other tax can be deducted from ourtax formula directly.Finally, using practical data of China and with reference to some formerstudies, we calibrated related parameters of our model. Through calculatingand analysis, we draw a curve wihich represents the relationship of theoptimal tax rates of value added tax and corporate income tax. If either ofthese two tax rates is predetermined, the optimal tax rate of the other tax canbe deducted from our tax rates curve.The study of this thesis will serve to evaluate the economic effects ofgovernment public expenditures more clearly, and make fiscal policies moresoundly.