Redistributive Capital Taxation Revisited

Özlem Kina, Ctirad Slavík and Hakki Yazici

American Economic Journal: Macroeconomics, 2024, vol. 16, issue 2, 182-216

Abstract: This paper uses a rich quantitative model with endogenous skill acquisition to show that capital-skill complementarity provides a quantitatively significant rationale to tax capital for redistributive governments. The optimal capital income tax rate is 67 percent, while it is 61 percent in an identically calibrated model without capital-skill complementarity. The skill premium falls from 1.9 to 1.84 along the transition following the optimal reform in the capital-skill complementarity model, implying substantial indirect redistribution from skilled to unskilled workers. These results show that a redistributive government should take into account capital-skill complementarity when taxing capital.

JEL-codes: D31 H21 H23 H24 H25 J24 J31 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/mac.20200395

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