Taxing Capital Income As Pigouvian Correction: The Role Of Discounting The Future
AbstractIn this work, we find that the zero capital income tax result might not hold, even at the steady state, when the government discount rate differs from the individual one. As intuitive Pigouvian considerations would suggest, capital income should be taxed (subsidized) when the government is less (more) impatient than individuals are. However, a counterintuitive asymmetry emerges as for the steady state since, in the long run, capital income cannot be taxed because of the explosive distortionary effect of positive taxes. The asymmetry is ruled out with a logarithmic utility function because, in this case, the anticipated policy path does not affect current individual choices and thus the cumulative distortionary effect of taxes disappears.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 9 (2005)
Issue (Month): 04 (September)
Contact details of provider:
Postal: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK
Fax: +44 (0)1223 325150
Web page: http://journals.cambridge.org/jid_MDYProvider-Email:firstname.lastname@example.org
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Spataro, Luca & De Bonis, Valeria, 2008. "Accounting for the "disconnectedness" of the economy in OLG models: A case for taxing capital income," Economic Modelling, Elsevier, vol. 25(3), pages 411-421, May.
- Catarina Reis, 2009.
"Social Discounting and Incentive Compatible Fiscal Policy,"
2009 Meeting Papers
413, Society for Economic Dynamics.
- Reis, Catarina, 2012. "Social discounting and incentive compatible fiscal policy," Journal of Economic Theory, Elsevier, vol. 147(6), pages 2469-2482.
- Valeria De Bonis & Luca Spataro, 2010.
"Social discounting, migration, and optimal taxation of savings,"
Oxford Economic Papers,
Oxford University Press, vol. 62(3), pages 603-623, July.
- Valeria DeBonis & Luca Spataro, 2006. "Social discounting, migration and optimal taxation of savings," CHILD Working Papers wp11_06, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
- Spataro, Luca & Renström, Thomas I., 2012.
"Optimal taxation, critical-level utilitarianism and economic growth,"
Journal of Public Economics,
Elsevier, vol. 96(9-10), pages 727-738.
- Luca Spataro & Thomas I. Renstroem, 2010. "Optimal taxation, critical-level utilitarianism and economic growth," Working Papers 2010_06, Durham University Business School.
- Garriga, Carlos & Sánchez-Losada, Fernando, 2009.
"Indirect taxation and the welfare effects of altruism on the optimal fiscal policy,"
Elsevier, vol. 26(6), pages 1365-1374, November.
- Carlos Garriga & Fernando Sánchez-Losada, 2009. "Indirect taxation and the welfare effects of altruism on the optimal fiscal policy," Working Papers 2009-047, Federal Reserve Bank of St. Louis.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters).
If references are entirely missing, you can add them using this form.