Redistributive taxation in a simple perfect foresight model

Judd, Kenneth L.

doi:10.1016/0047-2727(85)90020-9

Cited by 1,013 publications

(966 citation statements)

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“…There are well known reasons based on Atkinson & Stiglitz (1976), the considerations in Judd (1985) and Chamley (1986), and the administrative costs savings highlighted by Andrews (1974) for preferring consumption taxation.…”

Section: The Optimal Base Is Consumptionmentioning

confidence: 99%

The Use of Neutralities in International Tax Policy

Weisbach

2014

SSRN Journal

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Section: The Optimal Base Is Consumptionmentioning

confidence: 99%

The Use of Neutralities in International Tax Policy

Weisbach

2014

SSRN Journal

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“…In their seminal works, Chamley (1986) and Judd (1985) determine that it is not optimal to tax capital in an infinitely-lived agent model. In such a model, taxing capital income is equivalent to an ever increasing tax on future consumption, thus implying an exponentially increasing distortion between the marginal rate of substitution and the marginal rate of transformation.…”

Section: Jel: E24 E62 H21mentioning

confidence: 99%

The Effect of Endogenous Human Capital Accumulation on Optimal Taxation

Peterman

2012

SSRN Journal

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This paper considers the impact of endogenous human capital accumulation on optimal tax policy in a life cycle model. Including endogenous human capital accumulation, either through learning-by-doing or learning-or-doing, is analytically shown to create a motive for the government to use age-dependent labor income taxes. If the government cannot condition taxes on age, then it is optimal to use a tax on capital in order to mimic such taxes. Quantitatively, this work finds that introducing learning-by-doing or learning-or-doing increases the optimal tax on capital by forty or four percent, respectively. Overall, the optimal tax on capital is thirty five percent larger in the model with learning-by-doing compared to the model with learning-or-doing implying that how human capital accumulates is of significant importance when determining the optimal tax policy. JEL: E24, E62, H21.Key Words: Optimal Taxation, Capital Taxation, Human Capital.In their seminal works, Chamley (1986) and Judd (1985) determine that it is not optimal to tax capital in an infinitely-lived agent model. In such a model, taxing capital income is equivalent to an ever increasing tax on future consumption, thus implying an exponentially increasing distortion between the marginal rate of substitution and the marginal rate of transformation. In contrast, in a life cycle model agents live for a finite number of periods so the distortion imposed by a capital tax is bounded and may not necessarily be bigger than the distortions caused by other taxes. Atkeson et al. (1999), Erosa and Gervais (2002), and Garriga (2001) demonstrate in simplified life cycle models that if the government cannot condition labor income taxes on age, then it will generally tax capital in order to mimic an age-dependent tax. 1 The * E-mail: william.peterman@gmail.com. Views expressed on this site are my own and do not reflect the view of the Federal Reserve System or its staff. For extensive discussions and helpful comments, I thank Irina Telyukova, Valerie Ramey, Roger Gordon, and Scott Borger, as well as seminar participants at University of California at San Diego, Madrid Macroeconomic Workshop, the Federal Reserve Board of Governors, the Federal Reserve Bank of Philadelphia, the Eastern Economics Association Conference, the Missouri Economics Conference, the Midwestern Macroeconomics Conference, and the Conference in Computing in Economics and Finance. A previous version of this paper was distributed under the title "The Effect of Learning-by-Doing on Optimal Taxation" 1 Atkeson et al. (1999) demonstrate a related result. They show conditions under which the optimal tax on capital is zero if agedependent taxes on labor income are allowed. Gervais (2010) demonstrates that a progressive labor income tax can also mimicking age-dependent taxes on labor income.

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“…Dans la version calibrée, il est même semblable au niveau moyen dans les données 12. L'exception est le modèle de Judd (1985) que nous avons mentionné dans la deuxième section de cet article, où l'hétérogénéité provient de la richesse initiale des agents.…”

Section: Les Modèles Avec Contraintes De Liquiditéunclassified

“…Dans la première section du texte, nous analysons un modèle très simple afin d'illustrer le résultat célèbre de Chamley (1985de Chamley ( , 1986 et Judd (1985Judd ( , 1987 concernant la taxation optimale. Ces auteurs ont démontré que, dans les modèles à agent représentatif, le taux de taxation sur le revenu du capital devrait converger vers zéro à long terme.…”

Section: Introductionunclassified

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Les modèles à agent représentatif et la politique de taxation optimale

Ambler

2009

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RÉSUMÉ -Dans cet article, nous présentons un survol de la littérature macroéconomique sur la taxation optimale. En premier lieu, nous présentons un modèle très simple à agent représentatif afin de démontrer le résultat principal de cette littérature concernant le taux de taxation sur le revenu du capital; celui-ci devrait converger vers zéro à long terme. Deuxièmement, nous examinons la robustesse de ce résultat en étudiant des articles qui relâchent certaines des hypothèses simplificatrices du modèle de base. Troisièmement, nous critiquons les modèles à agent représentatif sur les bases de la plausibilité de leurs prédictions et de leur pertinence pour la conduite de la politique fiscale. Quatrièmement, nous examinons quelques pistes suivies récemment par des chercheurs qui ont renversé le résultat du taux de taxation nul sur le revenu du capital. En guise de conclusion, nous présentons quelques suggestions pour des pistes à suivre à l'avenir.ABSTRACT -In this paper, we présent a survey of the macroeconomics of optimal taxation. We begin by presenting a simple version of a représentative agent model in order to illustrate the main resuit in the literature concerning the taxation of capital income: the tax rate on capital income should converge to zéro in the long run. Second, we look at the robustness of this resuit by surveying récent articles which relax some of the simplifying assumptions of our simple model. Third, we criticize the représentative agent literature based on the plausibility of its prédictions and its relevance for the conduct of fiscal policy. Fourth, we look at some récent research which has overturned the resuit of no long-run taxation of capital income. Finally, we give some suggestions for fruitful avenues of research in the future.

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Redistributive taxation in a simple perfect foresight model

Cited by 1,013 publications

References 16 publications

The Use of Neutralities in International Tax Policy

The Use of Neutralities in International Tax Policy

The Effect of Endogenous Human Capital Accumulation on Optimal Taxation

Les modèles à agent représentatif et la politique de taxation optimale

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