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The spirit of capitalism and optimal capital taxation

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  • Li, Fanghui
  • Wang, Gaowang
  • Zou, Heng-fu

Abstract

The paper reexamines the famous Chamley–Judd zero capital tax theorem in model economies where the agents are endowed with the spirit of capitalism. It is shown that the limiting capital income tax is not zero in general and depends on the utility specifications rather than the production technology. The similar formulas of optimal capital taxes are derived in more general settings with multiple physical capitals or heterogeneous agents (capitalists and workers).

Suggested Citation

  • Li, Fanghui & Wang, Gaowang & Zou, Heng-fu, 2020. "The spirit of capitalism and optimal capital taxation," Economics Letters, Elsevier, vol. 192(C).
    • Handle: RePEc:eee:ecolet:v:192:y:2020:i:c:s0165176520301695
    DOI: 10.1016/j.econlet.2020.109243
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    References listed on IDEAS

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    Cited by:

    1. Wang, Gaowang & Zou, Heng-fu, 2020. "Optimal fiscal and monetary policy in economies with capital," MPRA Paper 102753, University Library of Munich, Germany.

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    More about this item

    Keywords

    The spirit of capitalism; Capital income taxation; Heterogeneous agents;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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