Is there a majority to support a capital tax cut?
AbstractA capital income tax cut must in general be financed by increasing other taxes, and thus will have redistributive effects. This paper studies analytically the redistribution implied by a capital income tax cut in the Ramsey-Cass-Koopmans neoclassical growth model when agents differ in wealth and human capital and markets are frictionless. A few parameters affect the efficiency costs and redistributive benefits of capital taxation, and determine the set of agents who are in favor of a capital income tax cut. For plausible parameter values, a majority would lose from the tax cut, i.e. high capital taxes may be politically sustainable.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 33 (2009)
Issue (Month): 6 (June)
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Web page: http://www.elsevier.com/locate/jedc
Heterogeneity Redistribution Capital taxation Optimal taxation;
Other versions of this item:
- François Gourio, 2008. "Is there a majority to support a capital tax cut?," Boston University - Department of Economics - Working Papers Series wp2008-001, Boston University - Department of Economics.
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