Optimal Indirect and Capital Taxation

Golosov, Mikhail; Kocherlakota, Narayana; Tsyvinski, Aleh

doi:10.1111/1467-937x.00256

Cited by 359 publications

(313 citation statements)

References 28 publications

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“…We show that this relationship does not a¤ect the optimal intertemporal distortion: i.e., the inverse Euler equation as in Golosov, Kocherlakota, and Tsyvinski (2003) continues to hold. Optimal distortions within the second period are similar to the results from the static model.…”

Section: Introductionmentioning

confidence: 79%

Preference Heterogeneity and Optimal Capital Income Taxation

Golosov

Troshkin

Tsyvinski³

et al. 2010

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We examine a prominent justification for capital income taxation: goods preferred by those with high ability ought to be taxed. In an environment where commodity taxes are allowed to be nonlinear functions of income and consumption, we derive an analytical expression that reveals the forces determining optimal commodity taxation. We then calibrate the model to evidence on the relationship between skills and preferences and extensively examine the quantitative case for taxes on future consumption (saving). In our baseline case of a unit intertemporal elasticity, optimal capital income tax rates are 2% on average and 4.5% on high earners. We find that the intertemporal elasticity of substitution has a substantial effect on optimal capital taxation. If the intertemporal elasticity is one-third, optimal capital income tax rates rise to 15% on average and 23% on high earners; if the intertemporal elasticity is two, optimal rates fall to 0.6% on average and 1.6% on high earners. Nevertheless, in all cases that we consider the welfare gains of using optimal capital taxes are small.

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Section: Introductionmentioning

confidence: 79%

Preference Heterogeneity and Optimal Capital Income Taxation

Golosov

Troshkin

Tsyvinski³

et al. 2010

Self Cite

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“…It is interesting to compare these implications with those of the optimal contract in a RMH problem. 11 In a standard RMH problem, the conditional distribution of output at time t depends only on the effort chosen by the agent at time t, that is, productivity can vary from high to low across periods, depending on the effort choice.…”

Section: Comparison With Long Term Implications Of Repeated (Non-persmentioning

confidence: 99%

Unobservable persistent productivity and long term contracts

Hopenhayn

Jarque

2010

Review of Economic Dynamics

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We study the problem of a firm that faces asymmetric information about the productivity of its potential workers. In our framework, a worker's productivity is either assigned by nature at birth, or determined by an unobservable initial action of the worker that has persistent effects over time. We provide a characterization of the optimal dynamic compensation scheme that attracts only high productivity workers: consumption -regardless of time period-is ranked according to likelihood ratios of output histories, and the inverse of the marginal utility of consumption satisfies the martingale property derived in Rogerson (1985). However, in the case of i.i.d. output and square root utility we show that, contrary to the features of the optimal contract for a repeated moral hazard problem, the level and the variance of consumption are negatively correlated, due to the influence of early luck into future compensation. Moreover, in this example long-term inequality is lower under persistent private information.Journal of Economic Literature Classification Numbers: D80, D82.

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“…Effectively this means that savings are infinitely elastic in the long run, and clearly it is inoptimal to tax a factor in infinitely elastic supply. 15 Allowing for an arbitrary length of consumer horizons (finite or infinite), Golosov et al (2003) also find that the optimal capital income tax rate is positive when labour income is stochastic, even in circumstances where a zero capital income tax rate would be optimal under perfect foresight.…”

Section: Should the Normal Return To Capital Be Taxed?mentioning

confidence: 99%

Can Capital Income Taxes Survive? And Should They?

Sørensen¹

2007

CESifo Economic Studies

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Optimal Indirect and Capital Taxation

Cited by 359 publications

References 28 publications

Preference Heterogeneity and Optimal Capital Income Taxation

Preference Heterogeneity and Optimal Capital Income Taxation

Unobservable persistent productivity and long term contracts

Can Capital Income Taxes Survive? And Should They?

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