Fiscal Policy: Capital Income Tax

Angus Chu

Chapter 7 in Advanced Macroeconomics:An Introduction for Undergraduates, 2020, pp 55-62 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In this chapter, we conclude our analysis of fiscal policy in the neoclassical growth model. In Chapter 6, we considered a labour income tax. However, labour income is not the only source of income that is taxed by the government. In this chapter, we consider instead a capital income tax, which is another tax instrument that we commonly observe in reality. In this case, we find that capital income tax is also contractionary by decreasing the accumulation of capital.

Keywords: Macroeconomics; Dynamic General Equilibrium; Economic Growth; Endogenous Technological Change; Monetary Policy; Fiscal Policy; Business Cycles; Unemployment; Market Failure; The Neoclassical Growth Model; The Romer Model; The Schumpeterian Growth Model; The Solow Growth Model; The Ramsey Model; The New Keynesian Model (search for similar items in EconPapers)
JEL-codes: E6 E62 E66 F4 F43 O11 (search for similar items in EconPapers)
Date: 2020
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