Increased Regressivity of the Optimal Capital Tax under a Welfare Constraint for Newborn Children
AbstractIn this paper, we develop a three-period model that incorporates parents' heterogeneous skills and a welfare constraint for newborn children. Our numerical analysis shows how the optimal tax system is affected by the weight attached to the newborn child by a social planner. The main finding is that an increase in the guaranteed welfare level for newborn children makes the optimal capital income tax rate more regressive. This result is closely related to the trade-off between incentives for parents and insurance for the newborn child.
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Bibliographic InfoPaper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 846.
Date of creation: Jan 2013
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More information through EDIRC
Optimal taxation; intergenerational inequality; private information;
Find related papers by JEL classification:
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-02-16 (All new papers)
- NEP-CTA-2013-02-16 (Contract Theory & Applications)
- NEP-MAC-2013-02-16 (Macroeconomics)
- NEP-PBE-2013-02-16 (Public Economics)
- NEP-PUB-2013-02-16 (Public Finance)
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