This paper compares property taxation to a corporate income tax based on formula apportionment in a model where identical countries compete to attract capital. We find that if countries can pair a residence-based capital tax with a property tax (source tax on capital) the tax equilibrium is efficient. In contrast, the use of a 2-factor FA scheme based on sales and capital combined with a reside...

abstract t he return of capital is fundamental to the intertemporal allocation of resources by changing the consumption behavior and capital accumulation over time. taxation on return of capital increases the marginal product of capital, meaning that capital stock is lower than when capital is not taxed, which results decreased growth and welfare in steady state. this paper studies the impact o...

How do taxes affect human capital accumulation? This question has been studied extensively in the context of two model classes: overlapping generations (OLG) and infinite horizon (IH) models. These embody very different assumptions about the intergenerational transmission of physical and human capital. OLG models typically abstract from intergenerational linkages, while IH models implicitly ass...

The paper discusses the implications of optimal tax theory for the debates on uniform commodity taxation and neutral capital income taxation. While strong administrative and political economy arguments in favor of uniform and neutral taxation remain, recent advances in optimal tax theory suggest that the information needed to implement the differentiated taxation prescribed by optimal tax theor...

This paper shows that in a one-sector real business cycle model with strong increasing returns in production, progressive taxation of labor income can stabilize the economy against sunspot ‡uctuations, even when the capital tax schedule is ‡at. This result is consistent with the U.S. tax code in which labor-income taxation is more progressive than capital-income taxation.

This paper provides a new economic interpretation of the well-known dynamic optimal taxation principle that capital income should not be taxed in the steady state. We show that the result is related to the minimization of distortions at the intratemporal margin. When every factor of production can be taxed at the optimal rate, capital income should not be taxed in the steady state. But when the...

This paper analyses tax competition and tax coordination in a model where capital flows occur in the form of mergers and acquisitions, rather than greenfield investment. In this framework, we show that differences in residence based taxes do not necessarily distort international ownership patterns. Moreover, tax competition yields globally efficient levels of source based corporate income taxes...

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...

The dual income tax combines a progressive tax on labor income and a lower flat rate tax on income from capital. Denmark, Finland, $orway, and Sweden adopted dual income taxes to address a set of tax challenges that arose in the late 1980s and early 1990s. Although developing countries face much different economic, political, and tax environments from the $ordic countries, the dual income tax m...

The net effects of switching from consumption taxation to inflation taxation on resource allocation and welfare crucially depend on production externalities. With elastic labor supply, raising inflation taxation decreases leisure, but increases the levels of real consumption, capital, and output. Moreover, this tax switch has two opposing effects on the level of real money balances: A positive ...