Loading...
Please wait, while we are loading the content...
Similar Documents
2007): “Optimal Capital Income Taxation
| Content Provider | CiteSeerX |
|---|---|
| Author | Abel, Andrew B. |
| Description | In an economy with identical infinitely-lived households that obtain utility from leisure as well as consumption, Chamley (1986) and Judd (1985) have shown that the optimal tax system to pay for an exogenous stream of government purchases involves a zero tax rate on capital in the long run. Tax revenue is collected by a distortionary tax on labor income. Extending the results of Hall and Jorgenson (1971) to general equilibrium, I show that if purchasers of capital are permitted to deduct capital expenditures from taxable capital income, then a constant tax rate on capital income is non-distortionary. Even though this specification of the capital income tax imposes a zero effective tax rate on capital, the capital income tax can collect substantial revenue. Provided that government purchases are not too large, the optimal tax system will consist of a positive tax rate on capital income and a zero tax rate on labor income—just the opposite of the results of Chamley and Judd. Moreover, I show that the utility of the representative consumer is higher with the tax system I |
| File Format | |
| Language | English |
| Publisher Institution | NBER Working Papers 13354, National Bureau of Economic Research, Inc |
| Access Restriction | Open |
| Subject Keyword | Capital Income Representative Consumer Taxable Capital Income Optimal Tax System Capital Income Tax Positive Tax Rate Constant Tax Rate Exogenous Stream Government Purchase Distortionary Tax Substantial Revenue General Equilibrium Labor Income Optimal Capital Income Taxation Tax System Tax Revenue Long Run Capital Expenditure Tax Rate Identical Infinitely-lived Household Zero Effective Tax Rate |
| Content Type | Text |
| Resource Type | Article |
