Capital Taxation and Rent Seeking
AbstractWe find the optimal capital income tax rate in an imperfectly competitive economy, where some part of recourses is devoted to rent-seeking activity. Optimal tax offsets the difference between marginal social and marginal private return to capital, which is a result of rent seeking, and the difference between the before tax interest rate and the marginal productivity of capital, which arises from imperfect competition. Optimal capital income tax rate depends neither on other tax rates nor on overall tax burden. Numerically it is close to zero.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 9988.
Date of creation: 11 Dec 2006
Date of revision:
Capital taxation; rent seeking; imperfect competition;
Find related papers by JEL classification:
- 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-2008-08-21 (All new papers)
- NEP-MAC-2008-08-21 (Macroeconomics)
- NEP-PBE-2008-08-21 (Public Economics)
- NEP-PUB-2008-08-21 (Public Finance)
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