School of Economics

2009 Discussion Papers

School of Economics Discussion Paper 09/25
December 2009

Tax Policy for Economic Recovery and Growth

Christopher Heady, Åsa Johansson, Jens Arnold, Bert Brys and Laura Vartia


This paper identifies tax policy that both speeds recovery from the current economic crisis and contributes to long-run growth. This is a challenge because short-term recovery requires increases in demand while long-term growth requires increases in supply. As short-term tax concessions can be hard to reverse, this implies that policies to alleviate the crisis could compromise long-run growth. The analysis makes use of recent evidence on the impact of tax structure on economic growth to identify which growth-enhancing tax changes can also aid recovery, taking account of the need to protect those on low incomes.

JEL Classification: H20, H30, O40

Keywords: Taxation, Tax Design, Tax Policy, Economic growth, Economic recovery

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