# On the Optimal Taxation of Capital Income

@inproceedings{Jones1993OnTO, title={On the Optimal Taxation of Capital Income}, author={Larry E. Jones and Rodolfo E. Manuelli and Peter E. Rossi}, year={1993} }

One of the best known results in modern public finance is the Chamley-Judd result showing that the optimal tax rate on capital income is zero in the long-run. In this paper, we reexamine this result by analyzing a series of generalizations of the Chamley-Judd formulation. We show that in a model with human capital, if the tax code is sufficiently rich and there are no pure profits from accumulating human capital, then all distorting taxes are zero in the long-run under the optimal plan. In this…

## 442 Citations

Why is the Long-Run Tax on Capital Income Zero? Explaining the Chamley-Judd Result

- Economics
- 2017

Why is it optimal not to tax capital income in the long-run in Chamley (1986) and Judd (1985)? This paper demonstrates that the answer follows standard intuitions from the commodity tax literature.…

Optimal Taxation of Capital Income in Models with Endogenous Fertility

- Economics
- 2007

This paper studies the issue of the efficient taxation of capital income in intertemporal optimizing models with infinite horizons and endogenous population growth. We discover that, in the steady…

Optimal Taxes without Commitment

- Economics
- 1997

Abstract In the problem of optimal taxation in an economy with labor and capital, the optimal solution when the government can commit to a sequence of tax rates entails that the tax on capital tends…

Tax Evasion , Endogenous Spending and the Design of Optimal Tax Codes

- Economics
- 1999

In this paper I show that, in economies characterized by tax evasion and endogeneity of government spending, the qualitative characterization of the optimal factor income taxes depends on both these…

Optimal Redistributive Capital Taxation in a Neoclassical Growth Model

- Economics
- 1998

This paper provides a counterexample to the simplest version of the redistribution models considered by Judd (1985) in which the government chooses an optimal distortionary tax on capitalists to…

Optimal Capital Income Taxation and Redistribution

- Economics
- 1999

This paper studies the effects of agent heterogeneity on optimal capital income taxes, where taxes are collected for redistributional purposes. In a finite horizon model with an arbitrary number of…

On the Optimal Taxation in a Growth Model of the Mixed Economy

- Economics
- 2005

Previous studies of second-best taxation have shown that capital income shall not be taxed in the long run for some cases where individuals have infinite lives and a utility function of special form.…

Optimal Capital Taxation in an Economy with Capital Allocation Frictions

- Economics
- 2009

We study optimal capital-income taxation in an economy in which search frictions in physical capital markets give rise to flows of economic profit. These profit flows are necessary compensation for…

Taxing Capital? Not a Bad Idea after All!

- Economics
- 2006

In this paper we quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic, uninsurable income shocks, where households also differ…

## References

SHOWING 1-10 OF 43 REFERENCES

Welfare Implications of the Taxation of Savings

- Economics
- 1980

Historically, the welfare aspects of the taxation of savings have mainly been discussed in the context of the relative merits of income and consumption (expenditure) taxation. These have long been…

Optimal Taxation and Public Production I: Production Efficiency, II: Tax Rules

- Economics
- 1971

Theories of optimal production in a planned economy have usually assumed that the tax system can allow the government to achieve any desired redistribution of property.' On the other hand, some…

Optimal Fiscal Policy in a Business Cycle Model

- EconomicsJournal of Political Economy
- 1994

This paper develops the quantitative implications of optimal fiscal policy in a business cycle model. In a stationary equilibrium, the ex ante tax rate on capital income is approximately zero. There…

Optimal Taxation in Models of Endogenous Growth

- EconomicsJournal of Political Economy
- 1993

We study the problem of optimal taxation in three infinite-horizon, representative-agent endogenous growth models. The first model is a convex model in which physical and human capital are perfectly…

A Contribution to the Theory of Taxation

- Economics
- 1927

TILE problem I propose to tackle is this: a given revenue is to be raised by proportionate taxes on some or all uses of income, the taxes on different uses being possibly at different rates; how…

The Welfare Cost of Factor Taxation in a Perfect-Foresight Model

- EconomicsJournal of Political Economy
- 1987

This paper examines the marginal efficiency cost of various factor taxes in a dynamic general-equilibrium model. The au thor solves for the excess burden of anticipated and unanticipated, t emporary…

Government Spending in a Simple Model of Endogeneous Growth

- EconomicsJournal of Political Economy
- 1990

One strand of endogenous-growth models assumes constant returns to a broad concept of capital. I extend these models to include tax-financed government services that affect production or utility.…