Capital Taxation under Political Constraints / Florian Scheuer, Alexander Wolitzky.

Format:

Book

Author/Creator:

Scheuer, Florian.

Contributor:

National Bureau of Economic Research.

Wolitzky, Alexander.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20043.

NBER working paper series no. w20043

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2014.

Summary:

This paper studies optimal dynamic tax policy under the threat of political reform. A policy will be reformed ex post if a large enough political coalition supports reform; thus, credible policies are those that will continue to attract enough political support in the future. If the only credible reform threat is to fully equalize consumption, we find that optimal marginal capital taxes are U-shaped, so that savings are subsidized for the middle class but are taxed for the poor and rich. If ex post the government may strategically propose a reform other than full equalization in order to secure additional political support, then optimal capital taxes are instead progressive throughout the income distribution.

Notes:

Print version record

April 2014.