Capital Wealth Taxation: Theory and Application

James Yunker

Review of Political Economy, 2014, vol. 26, issue 1, 85-110

Abstract: Using an ls model analysis, the economic effects of implementing a modest taxation rate on capital wealth (3%) are found to be basically favorable: slightly higher output, lower inequality as measured by various Gini coefficients, and higher social welfare according to the three major social welfare functions-Bentham, Nash and Rawls. Implementing capital wealth taxation enables a compensating reduction in the labor-income taxation rate. The single most important consequence of this change is increased labor output among the wealthiest households, whose labor productivity is highest. Even though labor output is reduced among less-wealthy households, the overall effect on aggregate output is positive.

Date: 2014
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DOI: 10.1080/09538259.2013.874193

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