On the Distributional Effects of Reducing Capital Taxes

@article{Domeij2003OnTD,
  title={On the Distributional Effects of Reducing Capital Taxes},
  author={David Domeij and Jonathan Heathcote},
  journal={Public Economics eJournal},
  year={2003}
}
We investigate the welfare implications of changing the mix between capital and labor taxes for a model economy in which heterogeneous households face uninsurable labor income risk. The stochastic process for labor earnings we construct is consistent with empirical estimates of earnings risk, and also implies a distribution of asset holdings across households closely resembling that in the United States. We find that a vast majority of households prefers the status quo to eliminating capital… 
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