Abstract
Recent analyses of the corporation income tax have tended to concentrate either on short-run shifting through market imperfection9 or on the shifting of capital between the incorporated and unincorporated sectors.2 Little attention has been paid to the impact of this tax on saving propensities and the level of capital formation. Similarly, analyses of the personal income tax have not fully explored the long run effect of continual taxation of the return to savings on the growth of an economy. As a partial filling of this gap, using a simple competitive growth model, this paper explores the differential incidence of an interest income tax rather than lump-sum tax levied on the same taxpayers.3 Savings are assumed to satisfy maximization of individual lifetime utility functions while production conforms to an aggregate neoclassical production function. Individuals are presumed
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