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Entrepreneurial labor and capital taxation
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In this article, the authors considered a Ramsey model of linear taxation for an economy with capital and two kinds of labor and showed that the optimal tax on observable labor income is higher than the capital tax, although both are strictly positive.Abstract:
This paper considers a Ramsey model of linear taxation for an economy with capital and two kinds of labor. If the government cannot distinguish between the return from capital and the return from entrepreneurial labor, then there will be positive capital income taxation, even in the long run. This happens because the only way to tax entrepreneurial labor is by also taxing capital. Furthermore, under fairly general conditions, the optimal tax on observable labor income is higher than the capital tax, although both are strictly positive. Thus, even though both income taxes are positive, imposing uniform income taxation would lead to additional distortions in the economy.read more
Citations
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Optimal Capital-Income Taxation in a Model with Credit Frictions
TL;DR: In this paper, the optimality of the long-run capital-income tax rate is revisited in a simple neoclassical growth model with credit frictions, where firms pay their factors of production in advance, which requires borrowing at the beginning of the period.
Optimal Taxation of Asset Income with Endogenous Government Consumption: Theory, Estimation and Welfare
TL;DR: In this paper, the authors derived the Ramsey optimal policy for taxing asset income in a model where government expenditure is a function of net output or the inputs that produce it, and demonstrated that the canonical result that the optimal tax on capital income is zero in the medium to long term is a special case of a more general model.
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Credit frictions and optimal labor-income taxation
TL;DR: In this paper, the authors studied optimal labor-income taxation in a simple model with credit constraints on firms and found that optimal policy prescribes a volatile path for the labor income tax rate even in the presence of state-contingent debt and capital.
References
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Journal ArticleDOI
Optimal fiscal and monetary policy in an economy without capital
Robert E. Lucas,Nancy L. Stokey +1 more
TL;DR: In this paper, the structure and time-consistency of optimal fiscal and monetary policy in an economy without capital are investigated. And the main finding is that with debt commitments of sufficiently rich maturity structure, an optimal policy, if one exists, is time-Consistent.
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Optimal taxation of capital income in general equilibrium with infinite lives
TL;DR: In this article, the optimal tax on capital income in general equilibrium models of the second best is analyzed and shown to be zero in the long run for a special case of additively separable utility functions and conditions that are sufficient for the local stability of the steady state.
Posted Content
On the Optimal Taxation of Capital Income
TL;DR: In this paper, a series of generalizations of the Chamley-Judd formulation is analyzed and it is shown that even for conservative specifications, tax rates of 10% and higher are possible under the optimal code.
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On the Optimal Taxation of Capital Income
TL;DR: In this paper, the Chamley and Judd result on zero capital income taxation in the limit extends to labor taxes as long as accumulation technologies are constant returns to scale, and for a class of widely used preferences, consumption taxes are zero in this limit as well.
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The Base for Direct Taxation
TL;DR: In this paper, the authors present the Atkinson-Stiglitz and Chamley-Judd results that capital income should not be taxed, but conclude that the required conditions are too restrictive and not robust enough for policy purposes.