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

Abstract:

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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