# Optimal taxation and spending in general competitive growth models

@article{Judd1999OptimalTA, title={Optimal taxation and spending in general competitive growth models}, author={Kenneth L. Judd}, journal={Journal of Public Economics}, year={1999}, volume={71}, pages={1-26} }

Abstract We find that the optimal long-run tax on capital income is zero even if the capital stock does not converge to a steady state nor to a steady state growth rate. The optimal tax on human capital is also zero if human capital is not a final good, but the long-run wage tax is not generally zero. We argue that “consumption” tax proposals, such as the Flat Tax, are not consumption taxes, and are biased against human capital.

## Figures from this paper

## 271 Citations

A Case Against Zero Capital-Income Taxation

- Economics
- 2013

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…

Optimal Capital Income Taxation in an Asymmetric Small Open Economy

- Economics
- 2006

Abstract This paper examines the structure of the optimal capital income taxation policy for a stochastic small open economy with a financial asymmetry in which the households have access to complete…

Optimal taxation of capital income with imperfectly competitive product markets

- Economics
- 1999

We show that the steady-state optimal tax on capital income can be negative, positive, or zero in a neoclassical growth model that allows for imperfectly competitive product markets. The sign of the…

Optimal Capital Income Taxation, Investment Subsidies and Redistribution in a Neoclassical Growth Model

- Economics
- 2007

In this paper I readdress the result that capital income taxes are bad instruments for pure redistribution and should be zero in the long run. In a neoclassical growth model a capital income cum…

Capital Taxation and Rent Seeking

- EconomicsRevue d'économie politique
- 2019

We find the optimal capital income tax rate in an imperfectly competitive economy, where some part of recourses is devoted to rent-seeking activity. Optimal tax offsets the difference between…

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.…

The Optimal Tax Rate for Capital Income is Negative

- Economics
- 1997

We examine the problem of optimal taxation in a dynamic economy with imperfectly competitive markets. We find that the optimal tax system will tend to provide subsidies for the purchase of capital…

Growth, Taxation and Public Finance

- Economics
- 2011

In economics the relationship between economic growth, debt, taxation and spending is an important one. In this paper we will use an optimal control model to analyze such relationship further. We…

Optimal Taxation with Commitment in a Two-sector Neoclassical Economy

- Economics
- 2005

This paper examines dynamic optimal income taxation problem in a two- sector neoclassical model where the government is able to commit to a sequence of tax plans for future. It finds that (1) while…

Second-best optimal taxation of capital and labor in a developing economy

- Economics
- 2005

This paper examines how the tax burden in a developing economy should be distributed between capital income and labor income. We study a two-sector model, where the traditional sector is "informal"…

## References

SHOWING 1-10 OF 28 REFERENCES

Redistributive Taxation in a Simple Perfect Foresight Model

- Economics
- 1985

Abstract We investigate the redistributive potential of capital taxation in an intertemporal maximizing model of capital formation. First, even unanticipated redistributive capital taxation is…

Taxation, Savings, and Portfolio Choice in a Continuous Time Model

- Economics
- 1987

The continuous time model of consumption and portfolio choice is used to examine the effects of taxation of capital income. Several types of taxes on asset returns are analyzed. For utility functions…

On the Optimal Taxation of Capital Income

- Economics
- 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…

Optimal Taxation and Public Production II: Tax Rules

- Economics
- 1971

set out the problem of using taxation and government production to maximize a social welfare function. We derived the first-order conditions, and considered the argument for efficiency in aggregate…

Notes on the Tax Treatment of Human Capital

- Economics
- 1975

Section 1 presents a preliminary attempt at clarifying the ways in which taxes affect human capital accumulation. Section 2 outlines a simple general equilibrium model with two capital goods -…

Differential Taxation, Public Goods, and Economic Efficiency

- Economics
- 1971

(2) Differential factor taxes3 make the marginal rates of substitution of different factors in different industries different, and hence interfere with productive efficiency. Examples include the…

Fiscal Policy, Inflation and the Accumulation of Risky Capital

- Economics
- 1981

The effect of government policies on the level of investment and inflation has become a major concern of policy-makers in a number of industrial countries. Proposals to raise the level of business…

Liquidity Constraints, Fiscal Policy, and Consumption

- Economics
- 1986

TAX POLICY AND TAX REFORM are important items on the current policy agenda. In evaluating alternative tax policies, decisionmakers must consider both their normative and positive impact; in…

The Optimal Taxation of Heterogeneous Capital

- Economics
- 1979

I. Introduction, 589.—II. The model, 590.—III. The controlled economy, 592.—IV. Competitive behavior, 593.—V. Optimal factor taxation, 596.—VI. The nature of optimal taxes, 602.—VII. Optimal capital…

The structure of indirect taxation and economic efficiency

- Economics
- 1972

The recent literature on indirect taxation has been characterised by two disjoint strands. On the one hand, there are the advocates of the replacement of differentiated indirect taxes by a uniform…