Human Capital and Optimal Positive Taxation of Capital Income

Bas Jacobs and A. Lans Bovenberg ()
Additional contact information
A. Lans Bovenberg: Erasmus Universiteit Rotterdam, and University of Tilburg

No 05-035/3, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This paper analyzes optimal linear taxes on capital and labor incomes in a life-cyclemodel of human capital investment, financial savings, and labor supply with heteroge-nous individuals. A dual income tax with a positive marginal tax rate on not onlylabor income but also capital income is optimal. The positive tax on capital incomeserves to alleviate the distortions of the labor tax on human capital accumulation.The optimal marginal tax rate on capital income is lower than that on labor incomeif savings are elastic compared to investment in human capital; substitution betweeninputs in human capital formation is difficult; and most investments in human capitalare verifiable. Numerical calculations suggest that the optimal marginal tax rate oncapital income is close to the tax rate on labor income.

This paper resulted in a publication in 'International Tax and Public Finance' .

Keywords: human capital; labor income taxation; capital income taxation; life cycle; education subsidies. (search for similar items in EconPapers)
JEL-codes: H2 H5 I2 J2 (search for similar items in EconPapers)
Date: 2005-04-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
https://papers.tinbergen.nl/05035.pdf (application/pdf)

Related works:
Journal Article: Human capital and optimal positive taxation of capital income (2010)
Working Paper: Human Capital and Optimal Positive Taxation of Capital Income (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20050035

Access Statistics for this paper

More papers in Tinbergen Institute Discussion Papers from Tinbergen Institute Contact information at EDIRC.
Bibliographic data for series maintained by Tinbergen Office +31 (0)10-4088900 ().