Dual Income Taxation: Why and How?

Peter Birch Sørensen
Additional contact information
Peter Birch Sørensen: Department of Economics, University of Denmark

No 05-10, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: The dual income tax combines a progressive tax schedule for labour income with a low flat tax rate on capital income and corporate income. This paper restates the case for the dual income tax and discusses alternative methods of taxing business income under such a tax system, paying special attention to the taxation of income from closely held corporations. It is argued that the imputed normal return to shares in unlisted companies should be taxed as capital income, while above-normal returns should be subject to labour income tax. The paper demonstrates that such a tax scheme can be designed to be neutral towards the firm’s investment and financing decisions and towards the decisions of shareholders to realize their shares.

Keywords: dual income tax; tax neutrality; taxation of business income; shareholder income tax (search for similar items in EconPapers)
JEL-codes: H24 H25 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2005-08
New Economics Papers: this item is included in nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://web.econ.ku.dk/epru/files/wp/wp-05-10.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://web.econ.ku.dk/epru/files/wp/wp-05-10.pdf [301 Moved permanently]--> https://web.econ.ku.dk/epru/files/wp/wp-05-10.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kud:epruwp:05-10

Access Statistics for this paper

More papers in EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics �ster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Hoffmann ().