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Optimal taxation of intangible capital

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  • Hagen, Kare P.
  • Kanniainen, Vesa

Abstract

This paper examines the optimal tax base in the profits tax with tangible and intagible capital and with positive external effects from investment in intangible capital. It is found that the optimal tax base adjustments for the two types of capital are determined by a compromise between the Ramsey argument for differential taxation associated with differences in demand and supply elasticities on the on hand, and the Pigouvian argument for subsidizing factors with public goods elements on the other.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 11 (1995)
Issue (Month): 2 (June)
Pages: 361-378

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Handle: RePEc:eee:poleco:v:11:y:1995:i:2:p:361-378

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Web page: http://www.elsevier.com/locate/inca/505544

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References

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  1. Feldstein, Martin S, 1978. "The Welfare Cost of Capital Income Taxation," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages S29-51, April.
  2. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
  3. Hans-Werner Sinn, 1991. "Taxation and the Cost of Capital: The "Old" View, the "New" View, and Another View," NBER Chapters, in: Tax Policy and the Economy, Volume 5, pages 25-54 National Bureau of Economic Research, Inc.
  4. Joseph E. Stiglitz & Partha Dasgupta, 1970. "Differential Taxation, Public Goods, and Economic Efficiency," Cowles Foundation Discussion Papers 299, Cowles Foundation for Research in Economics, Yale University.
  5. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  6. Jean-Jacques Laffont, 1988. "Fundamentals of Public Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121271, December.
  7. Boskin, Michael J, 1978. "Taxation, Saving, and the Rate of Interest," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages S3-27, April.
  8. Michael J. Boskin, 1978. "Taxation, Saving, and the Rate of Interest," NBER Chapters, in: Research in Taxation, pages 3-27 National Bureau of Economic Research, Inc.
  9. Chang, Ching-huei, 1988. "Optimal taxation of business and individual incomes," Journal of Public Economics, Elsevier, vol. 35(2), pages 251-263, March.
  10. Auerbach, Alan J, 1979. "The Optimal Taxation of Heterogeneous Capital," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 589-612, November.
  11. Mirrlees, James A, 1972. "On Producer Taxation," Review of Economic Studies, Wiley Blackwell, vol. 39(1), pages 105-11, January.
  12. Alan J. Auerbach, 1990. "The Deadweight Loss from `Non-Neutral' Capital Income Taxation," NBER Working Papers 2510, National Bureau of Economic Research, Inc.
  13. Dixit, Avinash K, 1970. "On the Optimum Structure of Commodity Taxes," American Economic Review, American Economic Association, vol. 60(3), pages 295-301, June.
  14. Sandmo, Agnar, 1985. "The effects of taxation on savings and risk taking," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 5, pages 265-311 Elsevier.
  15. Summers, Lawrence H, 1981. "Capital Taxation and Accumulation in a Life Cycle Growth Model," American Economic Review, American Economic Association, vol. 71(4), pages 533-44, September.
  16. Hagen, Kare P., 1988. "Optimal shadow prices for public production," Journal of Public Economics, Elsevier, vol. 35(1), pages 119-127, February.
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Cited by:
  1. Thomas A. Gresik, 2001. "The Taxing Task of Taxing Transnationals," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 800-838, September.

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