Optimal capital income taxation, investment subsidies and redistribution in a neoclassical growth model

Günther Rehme

No 188, Darmstadt Discussion Papers in Economics from Darmstadt University of Technology, Department of Law and Economics

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.

Keywords: Growth; Redistribution; Investment Subsidies; Capital Income Taxes (search for similar items in EconPapers)
JEL-codes: D33 H21 O41 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Optimal Capital Income Taxation, Investment Subsidies and Redistribution in a Neoclassical Growth Model (2009)
Working Paper: Optimal Capital Income Taxation, Investment Subsidies and Redistribution in a Neoclassical Growth Model (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:darddp:dar_35711

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