Non-linear Capital Taxation Without Commitment

Optimal Taxation and Debt Management without Commitment∗

This paper considers optimal fiscal policy in a deterministic Lucas and Stokey (1983) economy in the absence of government commitment. In every period, the government chooses a labor income tax and issues any unconstrained maturity structure of debt as a function of its outstanding debt portfolio. We find that the solution under commitment cannot always be sustained through the appropriate choi...

Capital taxation, inequality and polarisation under lack of commitment

Research from models allowing for heterogeneity in asset endowments and endogenously chosen …scal policy suggests a positive link between income inequality and both capital taxes and polarisation. However, while the second prediction receives empirical support, capital tax rates are negatively related with inequality in the data for OECD democracies. Using the basic neoclassical model with capi...

Capital Taxation, Growth, and Non-renewable Resources

The conventional view within the endogenous growth literature is that interest income taxes impede economic growth and investment subsidies promote economic growth. The present paper lays out a simple framework to see whether this is still true when non-renewable resources enter the ”growth engine” in an essential way. It is not! The framework allows a rich set of determinants of longrun growth...

Economics 2450A: Public Economics Section 9: Linear Capital Taxation

In this section we introduce a framework to study optimal linear capital taxation. We first focus on a two-period model, define the concept of intertemporal wedge and derive optimal capital taxes using the Atkinson Stiglitz result. We then move to an infinite horizon model with aggregate uncertainty and derive optimal taxes. Finally, we study a model with capitalists and workers and show that o...

Taxation and Capital Spending