Optimal Capital Taxation and Debt Policy in a Finite-Horizon Macro Model

Stephen Mccafferty
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Stephen Mccafferty: The Ohio State University

Public Finance Review, 1997, vol. 25, issue 6, 577-600

Abstract: This article analyzes optimal taxation and debt policies in a model of overlapping generations of finite-lived agents. Taxes are levied proportionately on capital and labor incomes. Tax rates are uniform across all agents. When the social and private discount rates coincide, the optimal steady-state tax rate on capital income is zero. Alternatively, the optimal steady-state tax rate on capital income is positive (or negative), and the optimal steady-state level of government debt is larger (or smaller) whenever the social discount rate is greater (or less) than the private discount rate.

Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:25:y:1997:i:6:p:577-600

DOI: 10.1177/109114219702500602

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