Asset Value Constraints in Models of Incomplete Factor Taxation
This paper clarifies the role of initial asset value constraints in Ramsey models of incomplete factor taxation. We show that the optimal long-run capital tax is zero in the long run if and only if there is no binding constraint on the initial capital tax rate. This finding contrasts with Armenter (2008) who argues that zero long-run capital taxes reappear in models of incomplete factor taxation as long as the government is barred from manipulating initial asset wealth. The reason for this difference is that the two constraints cannot both be binding at the same time. Hence, in Armenter’s (2008) analysis, the initial asset value constraint is necessarily more restrictive than the constraint on the initial capital tax rate.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: CP 8888, succursale Centre-Ville, Montréal, QC H3C 3P8|
Phone: (514) 987-8161
Web page: http://www.cirpee.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andrew Atkeson & V. V. Chari & Patrick J. Kehoe, 1999. "Taxing capital income: a bad idea," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 3-17.
- Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
- Larry E. Jones & Rodolfo E. Manuelli & Peter E. Rossi, 1993.
"On the Optimal Taxation of Capital Income,"
NBER Working Papers
4525, National Bureau of Economic Research, Inc.
- David M. Arseneau & Sanjay K. Chugh, 2007.
"Optimal fiscal and monetary policy with costly wage bargaining,"
International Finance Discussion Papers
893, Board of Governors of the Federal Reserve System (U.S.).
- Arseneau, David M. & Chugh, Sanjay K., 2008. "Optimal fiscal and monetary policy with costly wage bargaining," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1401-1414, November.
- David Domeij, 2005. "Optimal Capital Taxation and Labor Market Search," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(3), pages 623-650, July.
- Kenneth L. Judd, 1982.
"Redistributive Taxation in a Simple Perfect Foresight Model,"
572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Judd, Kenneth L., 1985. "Redistributive taxation in a simple perfect foresight model," Journal of Public Economics, Elsevier, vol. 28(1), pages 59-83, October.
- Jang-Ting Guo & Kevin J. Lansing, 1998.
"Optimal taxation of capital income with imperfectly competitive product markets,"
Working Papers in Applied Economic Theory
98-04, Federal Reserve Bank of San Francisco.
- Guo, Jang-Ting & Lansing, Kevin J., 1999. "Optimal taxation of capital income with imperfectly competitive product markets," Journal of Economic Dynamics and Control, Elsevier, vol. 23(7), pages 967-995, June.
- Armenter, Roc, 2008. "A note on incomplete factor taxation," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2275-2281, October.
- Correia, Isabel H., 1996. "Should capital income be taxed in the steady state?," Journal of Public Economics, Elsevier, vol. 60(1), pages 147-151, April.
When requesting a correction, please mention this item's handle: RePEc:lvl:lacicr:0949. 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: (Manuel Paradis)
If references are entirely missing, you can add them using this form.