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Is there a majority to support a capital tax cut?

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  • François Gourio

    (Boston University, Department of Economics)

Abstract

A capital income tax cut must in general be financed by increasing other taxes, and thus will have redistributive effects. This paper studies analytically the redistribution implied by a capital income tax cut in the Ramsey-Cass-Koopmans neoclassical growth model when agents differ in wealth and human capital and markets are frictionless. A few parameters a¤ect the efficiency benefits and redistributive costs of capital taxation, and determine the set of agents who are in favor of a capital income tax cut. For plausible parameter values, a majority would lose from the tax cut, i.e. high capital taxes may be politically sustainable.

Suggested Citation

  • François Gourio, 2008. "Is there a majority to support a capital tax cut?," Boston University - Department of Economics - Working Papers Series wp2008-001, Boston University - Department of Economics.
    • Handle: RePEc:bos:wpaper:wp2008-001
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    Cited by:

    1. Kyösti Pietola & Sami Myyrä & Eija Pouta, 2011. "The Effects of Changes in Capital Gains Taxes on Land Sales: Empirical Evidence from Finland," Land Economics, University of Wisconsin Press, vol. 87(4), pages 582-594.

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