A Case Against Zero Capital-Income Taxation
Darong Dai , Kunrong Shen , Ruihua Ma
Front. Econ. China ›› 2013, Vol. 8 ›› Issue (1) : 64 -90.
A Case Against Zero Capital-Income Taxation
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.
stochastic endogenous growth / endogenous labor supply / endogenous human capital / optimal capital income taxation / endogenous government consumption / governmental altruism
Higher Education Press and Brill
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