CAPITAL TAXATION IN A SIMPLE FINITE-HORIZON OLG MODEL

Charles Blackorby and Craig Brett

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: In a simple finite-horizon overlapping-generations model where the government has the power to levy commodity taxes and to implement uniform lump-sum transfers, and individuals as well as the government can purchase units of a storable good in order to transfer resources from the present to the future, we derive the equations that implicitly define the taxes and subsidies that are part of the second-best Pareto optima. In this context we first show that there is production efficiency. We then show that taxes on capital income/savings are required at almost all Pareto optima. Finally we show that there are no restriction on preferences or technologies that are consistent with a general exemption of capital income/savings from the tax base.

Keywords: overlapping generations; capital taxes; tax-reform (search for similar items in EconPapers)
JEL-codes: D5 D6 D91 H2 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Capital Taxation in a Simple Finite-Horizon OLG Model (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:709

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