Optimal Capital Income Taxation, Investment Subsidies and Redistribution in a Neoclassical Growth Model

Günther Rehme

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: In this paper I readdress the result that capital income taxes are bad instruments for pure redistribution and should be zero in the long run. In a neoclassical growth model a capital income cum investment subsidy tax, which is not distorting accumulation, is considered to investigate if net capital income taxes used for pure redistribution are zero in a long-run optimum. I find that capital income taxes may be nonzero, depending on the political power of those who receive redistributive transfers, the distribution of pre-tax factor incomes, and the intertemporal elasticity of substitution.

Date: 2009
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Published in Darmstadt Discussion Papers in Economics . 188 (2009)

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Related works:
Working Paper: Optimal Capital Income Taxation, Investment Subsidies and Redistribution in a Neoclassical Growth Model (2007)
Working Paper: Optimal capital income taxation, investment subsidies and redistribution in a neoclassical growth model (2007)
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