On the optimal timing of capital taxes
AbstractFor many kinds of capital, depreciation rates change systematically with the age of the capital. Consider an example that captures essential aspects of human capital, both regarding its accumulation and its depreciation: a worker obtains knowledge in period 0, then uses this knowledge in production in periods 1 and 2, and thereafter retires. Here, depreciation accelerates: it occurs at a 100% rate after period 2, and at a lower (perhaps zero) rate before that. The present paper analyzes the implications of non-constant depreciation rates for the optimal timing of taxes on capital income. The main finding is that under natural assumptions, the path of tax rates over time must be oscillatory. Oscillatory tax rates are optimal when depreciation rates accelerate with the age of the capital (as in the above example), and provided that the government can commit to the path of future tax rates but cannot apply different tax rates in a given year to different vintages of capital.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Monetary Economics.
Volume (Year): 55 (2008)
Issue (Month): 4 (May)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505566
Other versions of this item:
- D90 - Microeconomics - - Intertemporal Choice - - - General
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ariel Pakes & Zvi Griliches, 1984.
"Estimating Distributed Lags in Short Panels with an Application to the Specification of Depreciation Patterns and Capital Stock Constructs,"
NBER Working Papers
0933, National Bureau of Economic Research, Inc.
- Pakes, Ariel & Griliches, Zvi, 1984. "Estimating Distributed Lags in Short Panels with an Application to the Specification of Depreciation Patterns and Capital Stock Constructs," Review of Economic Studies, Wiley Blackwell, vol. 51(2), pages 243-62, April.
- Mark E. Doms & Wendy E. Dunn & Stephen D. Oliner & Daniel E. Sichel, 2003.
"How fast do personal computers depreciate? concepts and new estimates,"
Working Paper Series
2003-20, Federal Reserve Bank of San Francisco.
- Mark E. Doms & Wendy F. Dunn & Stephen D. Oliner & Daniel E. Sichel, 2004. "How Fast do Personal Computers Depreciate? Concepts and New Estimates," NBER Chapters, in: Tax Policy and the Economy, Volume 18, pages 37-80 National Bureau of Economic Research, Inc.
- Mark E. Doms & Wendy E. Dunn & Stephen D. Oliner & Daniel E. Sichel, 2004. "How Fast Do Personal Computers Depreciate? Concepts and New Estimates," NBER Working Papers 10521, National Bureau of Economic Research, Inc.
- Mark E. Doms & Wendy E. Dunn & Stephen D. Oliner & Daniel E. Sichel, 2004. "How fast do personal computers depreciate? concepts and new estimates," Finance and Economics Discussion Series 2004-31, Board of Governors of the Federal Reserve System (U.S.).
- Hassler, John & Storesletten, Kjetil & Zilibotti, Fabrizio, 2003.
"Democratic Public Good Provision,"
CEPR Discussion Papers
4044, C.E.P.R. Discussion Papers.
- Karl Whelan, 2002.
"Computers, Obsolescence, And Productivity,"
The Review of Economics and Statistics,
MIT Press, vol. 84(3), pages 445-461, August.
- Kenneth L. Judd, 1982.
"Redistributive Taxation in a Simple Perfect Foresight Model,"
572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Judd, Kenneth L., 1985. "Redistributive taxation in a simple perfect foresight model," Journal of Public Economics, Elsevier, vol. 28(1), pages 59-83, October.
- Michael J. Geske & Valerie A. Ramey & Matthew D. Shapiro, 2004.
"Why Do Computers Depreciate?,"
NBER Working Papers
10831, National Bureau of Economic Research, Inc.
- Stephen D. Oliner, 1993.
"New evidence on the retirement and depreciation of machine tools,"
Working Paper Series / Economic Activity Section
147, Board of Governors of the Federal Reserve System (U.S.).
- Oliner, Stephen D, 1996. "New Evidence on the Retirement and Depreciation of Machine Tools," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 57-77, January.
- Marcus Hagedorn, 2007. "Optimal Ramsey Tax Cycles," IEW - Working Papers 354, Institute for Empirical Research in Economics - University of Zurich.
- Barro, Robert J., 1979.
"On the Determination of the Public Debt,"
3451400, Harvard University Department of Economics.
- Davide Debortoli & Ricardo Nunes, 2007. "Loose commitment," International Finance Discussion Papers 916, Board of Governors of the Federal Reserve System (U.S.).
- Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
- Hassler, John & Krusell, Per & Storesletten, Kjetil & Zilibotti, Fabrizio, 2005. "The dynamics of government," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1331-1358, October.
- Correia, Isabel H., 1996. "Should capital income be taxed in the steady state?," Journal of Public Economics, Elsevier, vol. 60(1), pages 147-151, April.
- Hulten, Charles R. & Wykoff, Frank C., 1981. "The estimation of economic depreciation using vintage asset prices : An application of the Box-Cox power transformation," Journal of Econometrics, Elsevier, vol. 15(3), pages 367-396, April.
- Andrés Erosa & Martin Gervais, 1998.
"Optimal Taxation in Life-Cycle Economies,"
UWO Department of Economics Working Papers
9812, University of Western Ontario, Department of Economics.
- Coen, Robert M, 1975. "Investment Behavior, the Measurement of Depreciation, and Tax Policy," American Economic Review, American Economic Association, vol. 65(1), pages 59-74, March.
- Mathias Trabandt, 2007.
"Optimal Pre-Announced Tax Reform Revisited,"
Economics Working Papers
ECO2007/52, European University Institute.
- Mathias Trabandt, 2006. "Optimal Pre-Announced Tax Reforms Under Valuable And Productive Government Spending," 2006 Meeting Papers 668, Society for Economic Dynamics.
- Paul Klein & Per Krusell & José-Víctor Ríos-Rull, 2004.
"Time-Consistent Public Expenditures,"
122247000000000652, UCLA Department of Economics.
- Fabrizio Zilibotti, 2005. "The Research Agenda: Fabrizio Zilibotti on the Equilibrium Dynamics of Policies and Institutions," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 7(1), November.
- Kulp, Alison & Hartman, Joseph C., 2011. "Optimal tax depreciation with loss carry-forward and backward options," European Journal of Operational Research, Elsevier, vol. 208(2), pages 161-169, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.