Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface
- List of conference participants
- 1 Introduction
- 2 The efficient design of public debt
- 3 Indexation and maturity of government bonds: an exploratory model
- 4 Public confidence and debt management: a model and a case study of Italy
- 5 Confidence crises and public debt management
- 6 Funding crises in the aftermath of World War I
- 7 The capital levy in theory and practice
- 8 Episodes in the public debt history of the United States
- 9 The Italian national debt conversion of 1906
- 10 Fear of deficit financing – is it rational?
- 11 Government domestic debt and the risk of default: a political–economic model of the strategic role of debt
- Index
7 - The capital levy in theory and practice
Published online by Cambridge University Press: 05 July 2011
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface
- List of conference participants
- 1 Introduction
- 2 The efficient design of public debt
- 3 Indexation and maturity of government bonds: an exploratory model
- 4 Public confidence and debt management: a model and a case study of Italy
- 5 Confidence crises and public debt management
- 6 Funding crises in the aftermath of World War I
- 7 The capital levy in theory and practice
- 8 Episodes in the public debt history of the United States
- 9 The Italian national debt conversion of 1906
- 10 Fear of deficit financing – is it rational?
- 11 Government domestic debt and the risk of default: a political–economic model of the strategic role of debt
- Index
Summary
Introduction
Debt management is a topic of considerable concern in Europe today. Italy, Belgium and Ireland all have debt-to-GDP ratios of around 100 per cent. Debt service consequently absorbs a significant share of government revenues, and shocks to real interest rates or economic growth threaten to launch debt-income ratios onto an explosive path. Substantial attention is devoted to alternative strategies for minimizing these dangers and costs (Giavazzi and Spaventa, 1988). These include budget surpluses designed to retire debt, inflationary policies designed to erode its real value, and capital levies designed to eliminate the debt burden at the stroke of a pen.
A capital levy in which a one-time tax is levied on all wealth holders with the goal of retiring public debt is the most controversial solution to the problem. The reasons for controversy are clear. A capital levy has prominent distributional consequences. It transfers wealth from asset holders to taxpayers who pay in the monies used to service the debt or to the beneficiaries of public programs that are crowded out by debt service costs. Alternatives such as inflation, forced conversion and debt retirement have distributional implications as well, but those consequences are usually less pronounced and hence not so hotly contested.
Moreover, it is not even clear that a capital levy can succeed in lowering the cost of debt service, properly measured, or enable the government to achieve its other objectives.
- Type
- Chapter
- Information
- Public Debt ManagementTheory and History, pp. 191 - 220Publisher: Cambridge University PressPrint publication year: 1990
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