Taxing Capital? Not a Bad Idea After All!
Conesa, Juan Carlos (Universitat Autònoma de Barcelona. Departament d'Economia i d'Història Econòmica)
Kitao, Sagiri (University of Southern California. Marshall School of Business)
Krueger, Dirk (University of Pennsylvania. Department of Economics)

Date:	2009
Abstract:	We quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic, uninsurable income shocks and permanent productivity differences of households. The optimal capital income tax rate is significantly positive at 36 percent. The optimal progressive labor income tax is, roughly, a flat tax of 23 percent with a deduction of #7,200 (relative to average household income of #42,000). The high optimal capital income tax is mainly driven by the life-cycle structure of the model, whereas the optimal progressivity of the labor income tax is attributable to the insurance and redistribution role of the tax system. (JEL E13, H21, H24, H25).
Note:	Premi a l'excel·lència investigadora. 2010
Note:	Publicat també com a : CEPR Discussion Paper - ISSN 0265-8003 Núm. 5929 (2006), p. 1-55
Rights:	Tots els drets reservats.
Language:	Anglès
Document:	Article ; recerca ; Versió acceptada per publicar
Subject:	PREI 2010 ; Progressive Taxes ; Capital Taxation ; Optimal Taxation
Published in:	The American economic review, Vol. 99 (1) (2009), p. 25-48, ISSN 0002-8282

DOI: 10.1257/aer.99.1.25

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