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Optimal Dynamic Taxation

Author

Listed:
  • Renstrom, T.

Abstract

This paper reviews the recent optimal dynamic tax literature, and links the results from dynastic one-person economies, dynastic heterogeneous individual economies and overlapping generations economies. The paper shows that the second best labour tax is positive, and further analyses the dynamic path of capital and labour taxes, as well as he economy's adjustment under the optimal programme. Furthermore, we prove that in a heterogeneous individual economy, every individual's most prefereed capital tax in steady state is zero. The optimal labour tax in a heterogeneous individual framework is similar to the optimal labour tax in a one -person economy.

Suggested Citation

  • Renstrom, T., 1999. "Optimal Dynamic Taxation," Discussion Papers 99-21, Department of Economics, University of Birmingham.
  • Handle: RePEc:bir:birmec:99-21
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    Cited by:

    1. Valeria De Bonis & Luca Spataro, 2005. "Taxing Capital Income in a Perpetual Youth Economy," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2005(87).
    2. Jorge Soares, Marina Azzimonti, Pierre-Daniel Sarte & Pierre-Daniel Sarte & Jorge Soares, 2006. "Optimal Policy and (the Lack of) Time Inconsistency: Insights from Simple Models," Working Papers 06-08, University of Delaware, Department of Economics.
    3. George Abuselidze, 2013. "Optimal Tax Policy - Financial Crisis Overcoming Factor," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(11), pages 1451-1459, November.

    More about this item

    Keywords

    TAXATION ; FISCAL POLICY ; GENERATIONS;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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