CFDP 699

Optimal Taxation of Capital Income in Economies with Identical Private and Social Discount Rates


Publication Date: April 1984

Pages: 33


The optimal capital income tax is analyzed in the framework of intertemporal efficient taxation. The relation between the zero tax in the long-run and the equality between private and social discount rates is emphasized. The properties of the dynamic second best path described for a specific example (convergence to a steady state and values of the capital income tax in the transition). The case where wealth is a specific utility argument is also considered.