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Frontiers of Economics in China

Front Econ Chin    2013, Vol. 8 Issue (1) : 64-90
A Case Against Zero Capital-Income Taxation
Darong Dai1(), Kunrong Shen2(), Ruihua Ma3()
1. School of Economics, Nanjing University, Nanjing 210093, China; 2. School of Economics, Nanjing University, Nanjing 210093, China; 3. School of Management, Nanjing University, Nanjing 210093, China
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This paper develops a dynamic general equilibrium model to investigate the optimal level of capital income taxation in light of stochastic endogenous economic growth. Although endogenous human capital is incorporated into our model, we restrict our investigation to the issue of optimal physical capital income tax; and the labor supply is also endogenously determined. This paper proves that the optimal capital income tax should be zero provided exogenous government expenditure on production; however, capital income should be taxed if we consider endogenous government consumption.

Keywords stochastic endogenous growth      endogenous labor supply      endogenous human capital      optimal capital income taxation      endogenous government consumption      governmental altruism     
Corresponding Author(s): Darong Dai,; Kunrong Shen,; Ruihua Ma,   
Issue Date: 05 March 2013
 Cite this article:   
Ruihua Ma,Darong Dai,Kunrong Shen. A Case Against Zero Capital-Income Taxation[J]. Front Econ Chin, 2013, 8(1): 64-90.
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Ruihua Ma
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