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Optimal Capital Taxation Revisited

Varadarajan Chari (), Pedro Teles () and Juan Pablo Nicolini ()

No 752, Working Papers from Federal Reserve Bank of Minneapolis

Abstract: We revisit the question of how capital should be taxed, arguing that if governments are allowed to use the kinds of tax instruments widely used in practice, for preferences that are standard in the macroeconomic literature, the optimal approach is to never distort capital accumulation. We show that the results in the literature that lead to the presumption that capital ought to be taxed for some time arise because of the initial confiscation of wealth and because the tax system is restricted.

Keywords: Uniform taxation; Long run; Capital income tax (search for similar items in EconPapers)
JEL-codes: E62 E61 E60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-dge, nep-mac, nep-pbe and nep-pub
Date: 2018-07-06, Revised 2018-07-06
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmwp:752

DOI: 10.21034/wp.752

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