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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | The Effect of Time-Consistent Capital Taxation on Capital Accumulation and Welfare |
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| Authors |
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| Series Name | SSRN |
| Number | 2084721 |
| Number of Pages | 31 |
| Date | 2012 |
| Abstract Text | This paper analyzes the effects of time-consistent capital taxation on the level of capital and welfare. We find that a commitment to a zero capital tax shifts the time inconsistency problem towards labor taxes and the provision of public consumption. By comparing the worst timeconsistent policies with and without a commitment to zero capital taxes, we find that the mere existence of a capital tax might lead to capital tax rates that are as high as 90% at steady state and capital stocks that are 84% lower. There the welfare gains of a commitment to zero capital taxes are about 7,4% of initial steady state consumption. At the other end, comparing the best time-consistent policies, we find that the welfare losses of a commitment to zero capital taxes are about 0,9% of consumption. |
| Official URL | http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2084721 |
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