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Taxing Mobile Capital with Labor Market Imperfections

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  • Wolfram Richter

    ()

  • Kerstin Schneider

Abstract

Taxing internationally mobile factors of production has been dismissed as an inefficient means of raising tax revenue. This paper addresses the question of whether it is efficient to tax capital at source when labor markets and the taxation of lumpsum income suffer from imperfections. Four reasons for taxing capital are identified: (i) institutional constraints rendering any taxation of profit income infeasible; (ii) market power in the demand for labor; (iii) market power in the supply of labor if it increases with the employment of capital; (iv) unemployment benefits that are not tied to net real wages. It is argued that the case for taxing capital is not particularly strong. By reinterpreting capital as energy the results are applicable to the discussion about ecological tax reforms. Copyright Kluwer Academic Publishers 2001

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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 8 (2001)
Issue (Month): 3 (May)
Pages: 245-262

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Handle: RePEc:kap:itaxpf:v:8:y:2001:i:3:p:245-262

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: optimal taxation; factor mobility; labor market imperfections; ecological tax reform;

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References

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  17. Richter, Wolfram F. & Schneider, Kerstin, 2003. "Energy taxation: Reasons for discriminating in favor of the production sector," European Economic Review, Elsevier, vol. 47(3), pages 461-476, June.
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