IDEAS home Printed from https://ideas.repec.org/a/cup/macdyn/v13y2009i03p279-304_08.html
   My bibliography  Save this article

Why Are Capital Income Taxes So High?

Author

Listed:
  • Floden, Martin

Abstract

The Ramsey optimal taxation theory implies that the tax rate on capital income should be zero in the long run. This result holds even if the social planner only cares about workers that do not hold assets, or if the planner only cares about any other group in the economy. This paper demonstrates that although all households agree that capital income taxation should be eliminated in the long run, they do not agree on how to eliminate these taxes. Wealthy households would prefer a reform that is funded by higher taxes on labour income while households with little wealth would prefer a reform that is funded mostly by high taxes on initial wealth. Pareto improving reforms typically exist, but the welfare gains of such reforms are modest.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Floden, Martin, 2009. "Why Are Capital Income Taxes So High?," Macroeconomic Dynamics, Cambridge University Press, vol. 13(03), pages 279-304, June.
  • Handle: RePEc:cup:macdyn:v:13:y:2009:i:03:p:279-304_08
    as

    Download full text from publisher

    File URL: http://journals.cambridge.org/abstract_S136510050808005X
    File Function: link to article abstract page
    Download Restriction: no

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Albert Marcet & Katharina Greulich, 2008. "Pareto-Improving Optimal Capital and Labor Taxes," UFAE and IAE Working Papers 733.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    2. Gourio, François, 2009. "Is there a majority to support a capital tax cut?," Journal of Economic Dynamics and Control, Elsevier, vol. 33(6), pages 1278-1295, June.
    3. Mathieu-Bolh, Nathalie, 2010. "Welfare improving distributionally neutral tax reforms," Economic Modelling, Elsevier, vol. 27(5), pages 1253-1268, September.

    More about this item

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:macdyn:v:13:y:2009:i:03:p:279-304_08. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters). General contact details of provider: http://journals.cambridge.org/jid_MDY .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.