Capital Taxation under Political Constraints
Name
Wolitzky_Capital taxation.pdf
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842.49 KB
Format
Adobe PDF
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Author(s)
Scheuer, Florian
Wolitzky, Alexander Greenberg
Date Issued
August 2016
Journal
American Economic Review
Publisher
American Economic Association (AEA)
Citation
Scheuer, Florian, and Alexander Wolitzky. “Capital Taxation Under Political Constraints.” American Economic Review 106, no. 8 (August 2016): 2304–2328. © 2016 American Economic Association.
Version
Final published version
Abstract
This paper studies optimal dynamic tax policy under the threat of political reform. A policy will be reformed ex post if a large enough coalition of citizens supports reform; thus, sustainable policies are those that will continue to attract enough political support in the future. We find that optimal marginal capital taxes are either progressive or U-shaped, so that savings are subsidized for the poor and/or the middle class but are taxed for the rich. U-shaped capital taxes always emerge when individuals' political behavior is purely determined by economic motives.
MIT Department
Massachusetts Institute of Technology. Department of Economics
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1257/aer.20141081
