Is there a majority to support a capital tax cut?

Francois Gourio

No wp2008-001, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: A capital income tax cut must in general be financed by increasing other taxes, and thus will have redistributive effects. This paper studies analytically the redistribution implied by a capital income tax cut in the Ramsey-Cass-Koopmans neoclassical growth model when agents differ in wealth and human capital and markets are frictionless. A few parameters a¤ect the efficiency benefits and redistributive costs of capital taxation, and determine the set of agents who are in favor of a capital income tax cut. For plausible parameter values, a majority would lose from the tax cut, i.e. high capital taxes may be politically sustainable.

Pages: 25
Date: 2008-09
New Economics Papers: this item is included in nep-dge, nep-pbe and nep-pub
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Journal Article: Is there a majority to support a capital tax cut? (2009)
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