Capital Taxation under Political Constraints

Florian Scheuer and Alexander Wolitzky

American Economic Review, 2016, vol. 106, issue 8, 2304-28

Abstract: This paper studies optimal dynamic tax policy under the threat of political reform. A policy will be reformed ex post if a large enough coalition of citizens supports reform; thus, sustainable policies are those that will continue to attract enough political support in the future. We find that optimal marginal capital taxes are either progressive or U-shaped, so that savings are subsidized for the poor and/or the middle class but are taxed for the rich. U-shaped capital taxes always emerge when individuals' political behavior is purely determined by economic motives.

JEL-codes: D12 D14 D31 D72 H21 H25 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/aer.20141081
References: Add references at CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
https://www.aeaweb.org/articles?id=10.1257/aer.20141081 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... FO3Tu1bDzogL7sOGOmux (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... yROrufinYBVKaS4O0tpy (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... Oqw3T2tXSL46PoyWJrnu (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Capital Taxation under Political Constraints (2015)
Working Paper: Capital Taxation under Political Constraints (2014)
Working Paper: Capital Taxation under Political Constraints (2014)
Working Paper: Capital Taxation under Political Constraints (2014)
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:aea:aecrev:v:106:y:2016:i:8:p:2304-28

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().