This paper examines optimal factor taxation when output is produced from labour and capital and some (or all) households save capital. It is shown that there is a reputational equilibrium in which the government has no incentive to change its announced tax policies. In this equilibrium, the Judd-Chamley assertion that the tax on capital income tends to zero in the limit holds. This is independe...

Pension benefit rules depend on individual history far more than taxes do, and age plays a much larger role in pension determination than in tax determination. Apart from some simulation studies, theoretical studies of optimal tax design typically contain neither a mandatory pension system nor the behavioral dimensions that lie behind justifications commonly offered for mandatory pensions. Conv...

We show the unique form that must be taken by a tax system based entirely on realization accounting to implement a uniform capital income tax, or, equivalently, a uniform wealth tax. This system combines elements of an accrual based capital income tax and a traditional cashflow tax, having many of the attributes of the latter while still imposing a tax burden on marginal capital income. Like th...

The paper analyzes the effects of a source-based capital income tax on production and market structures, trade and capital flows as well as national and global welfare. The analysis is carried by means of a general equilibrium model of trade which incorporates international capital flows as well as the existence of multinational enterprises. The focus of the paper is on identifying the influenc...

Pension benefit rules depend on individual history far more than taxes do, and age plays a much larger role in pension determination than in tax determination. Apart from some simulation studies, theoretical studies of optimal tax design typically contain neither a mandatory pension system nor the behavioral dimensions that lie behind justifications commonly offered for mandatory pensions. Conv...

The integration of European financial markets of the 1980s created an environment of nearperfect capital mobility across countries that had harmonized indirect taxes but maintained large differences in factor taxes. The years that followed witnessed several rounds of competition in capital taxes with puzzling results. Instead of the dreaded “race to the bottom” in capital taxes, the U.K. lowere...

The MIT Faculty has made this article openly available. Please share how this access benefits you. Your story matters. Pension benefit rules depend on individual history far more than taxes do, and age plays a much larger role in pension determination than in tax determination. Apart from some simulation studies, theoretical studies of optimal tax design typically contain neither a mandatory pe...

In an economy with identical infinitely-lived households that obtain utility from leisure as well as consumption, Chamley (1986) and Judd (1985) have shown that the optimal tax system to pay for an exogenous stream of government purchases involves a zero tax rate on capital in the long run, with tax revenue collected by a distortionary tax on labor income. Extending the results of Hall and Jorg...

This paper discusses capital gains taxation on movable property in Switzerland which was completely abolished at the canton level in 1996 but is now under political discussion as a tax at the confederation level. Economic reasoning on the features of the Swiss tax system and empirical results for canton data on the capital gains tax in the past suggest that such a tax has a negative effect on r...

This paper studies optimum income taxation in a small open economy where households differ with respect to their endowments with wealth. The government raises taxes on income from labor and wealth and a source tax on capital used in domestic production. To avoid taxes, households may, at some cost, shift capital to labor income and vice versa. The government can only observe income after shifti...