On optimal redistributive capital taxation
|Speaker:||Les Reinhorn, University of Durham|
|Date:||Friday 20 February 2004|
|Location:||Room 106 Streatam Court|
This paper addresses conflicting results regarding the optimal taxation of capital income. Judd (1985) proves that in steady state there should be no taxation of capital income. Lansing (1999) studies a particular example of one of Judd's models and finds that the optimal steady state tax on capital income is not always zero -- it is positive in some specifications, negative in some others. There appears to be a contradiction. However, Lansing's example does not satisfy the hypotheses of Judd's theorem. Under less restrictive hypotheses I prove a theorem that includes the results of both Judd and Lansing as special cases.