Estate and Capital Gains Taxation: Efficiency and Political Economy Consideration
AbstractIn this paper a simple dynastic overlapping-generations model with homogeneous agents is used to analyze the optimal use of capital income tax, labor income tax and estate tax. The results of this analysis add to the conventional wisdom about capital income taxation: while it is true that in the long run the estate tax rate should be set to zero, it is also true that other capital income taxation is a usable policy tool even in the steady state. The other contribution of the paper is the building of a simple dynamic political economy model where the structure of capital taxes is determined. In a median-voter framework with no policy commitment, estate taxation is used too heavily as a capital-tax-revenue-collecting tool relative to the second-best optimum for the social planner.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1198.
Date of creation: 2004
Date of revision:
capital income taxation; optimal taxation; political economy;
Other versions of this item:
- Saku Aura, 2004. "Estate and Capital Gains Taxation: Efficiency and Political Economy Considerations," Working Papers 0408, Department of Economics, University of Missouri, revised 16 Dec 2004.
- Saku Aura, 2004. "Estate and Capital Gains Taxation: Efficiency and Political Economy Considerations," Public Economics 0404011, EconWPA.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-02 (All new papers)
- NEP-PBE-2004-08-02 (Public Economics)
- NEP-POL-2004-08-02 (Positive Political Economics)
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