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Optimal Capital Income Taxation with Means-tested Benefits

Cagri Kumru () and John Piggott ()

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

Abstract: This paper studies the interaction between capital income taxation and a means tested age pension in the context of an overlapping generations model, calibrated to the UK economy. Recent literature has suggested a rehabilitation of capital income taxation (Conesa et al. (2009)), predicated on the idea that capital is a complement with retirement leisure. This leads naturally to the conjecture that a publicly funded age pension contingent upon holdings of capital or capital income may have a similar effect. We formalize this using a stochastic OLG model with multiple individuals differentiated by labour productivity and pension entitlement. Our preliminary findings suggest that a means tested pension has effects similar to capital income taxation in a life-cycle context.

Keywords: dynamic general equilibrium; taxation; welfare (search for similar items in EconPapers)
JEL-codes: E21 E62 H55 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2012-09
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Related works:
Journal Article: Optimal Capital Income Taxation with Means-tested Benefits (2017) Downloads
Working Paper: Optimal Capital Income Taxation with Means-tested Benefits (2012) Downloads
Working Paper: Optimal Capital Income Taxation with Means-tested Benefits (2012) Downloads
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