To analyze the optimal social insurance package, we set up a two-period life-cycle model with risky human capital investment, where the government has access to labor taxation, education subsidies and capital taxation. Social insurance is provided by redistributive labor taxation. Moreover, both education subsidies and capital taxation are used as catalyzers to facilitate social insurance by mi...

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 ...

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 pape...

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...

In a cross-border takeover, the tax base associated with future capital gains is transferred from target shareholders to acquirer shareholders. Cross-country differences in capital gains tax rates enable us to estimate the discount in the takeover price on account of future capital gains. The estimation suggests that a one percentage point increase in the capital gains tax rate reduces the valu...

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.

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...

Chapter Outline Designing Broad-Based Taxes: The Economic Objectives 171 Ability to Pay: Theoretical Considerations 173 Two Preliminary Considerations 173 Horizontal Equity 174 From Horizontal Equity to the Ideal Tax Base 174 The Three Principles of Tax Design 174 People Bear the Tax Burden 174 Individuals Sacrifice Utility 174 The Ideal Tax Base as the Best Surrogate Measure of Utility 175 Hai...

We set up a two-period model, where individuals finance educational investment and first-period consumption by borrowing against risky second-period labor income. We show that the government should use both education subsidies and capital taxation to mitigate distortions, stemming from social insurance through labor taxation, and we derive a Ramsey-rule for the optimal combination of these inst...

This paper evaluates the quantitative impact of capital liberalization on the taxation structure and welfare of the liberalizing countries when governments conduct fiscal policy optimally but without commitment (time-consistent policies). The transition from a regime of capital autarky to a regime of free mobility leads to a decrease in the long-term tax rate on capital of 13 percent and an inc...