Progressive taxation in a dynastic model of human capital

We develop a quantitative theory of economic inequality to investigate the effects of replacing the current U.S. progressive income tax system with a proportional one. The cross-sectional implications of the theory are used to discipline the assessment of the effects of tax policy and circumvent the lack of conclusive micro-evidence on the parameterization of the human capital production technology. We find that the elimination of progressive taxation increases steady state level of output by 12.6%, capital by 21.8%, and consumption by 13.2%. Moreover, it increases economic inequality and its persistence across generations.     

Ageing and public capital accumulation

We have examined the effects of ageing on the balanced-growth-maximizing public investment policy in an overlapping generations model with growth engines of public capital accumulation. Extended life expectancy tends to increase individual savings, while the increased old-age dependency requires more resources to be allocated to consumption in the economy. Declining working population makes for a severe trade-off between private and public capital accumulation. It is shown that as ageing proceeds, not only the income tax rate must be raised to accelerate public capital formation but the expenditure share of maintenance should be increased in order to maximize the balanced-growth rate.      

Tax reform and external balance

This paper examines the effect of a transformation from capital taxation to consumption in an open economy. With the residential capital tax rate being endogenous, an increase in the domestic consumption tax rate decreases the interest rate, increases capital accumulation, and increases the domestic country's net foreign asset holdings and trade surplus. With the territorial capital tax rate being endogenous, an increase in the domestic consumption tax rate may either increase or decrease the domestic country's interest rate, net foreign asset holdings and trade surplus, depending on the interest elasticity of capital demand.     

From Destination- to Origin-Based Consumption Taxation: A Dynamic CGE Analysis

A switch from the current destination-based value-added taxation to an origin-based consumption tax will not be neutral in a world economy with international capital mobility and overlapping generations. This paper evaluates the macroeconomic and welfare effects of such a multilateral reform in a two-region, intertemporal general equilibrium model. The analysis isolates and quantifies income effects due to changes in generations' tax burdens, factor price repercussions and initial asset price adjustments, as well as efficiency effects that arise from endogenous labor supply and short run savings responses in a numerical simulation exercise.     

Public capital, public pension, and growth

This paper constructs an endogenous growth model with overlapping generations, whose engine of economic growth is productive public capital. We investigate a public policy under which the government allocates tax revenue between investment in public capital accumulation and public pension provision. We show that increasing the share of spending on public pensions always reduces economic growth. However, we show numerically that public pension provision improves social welfare and there exists an optimal share of spending on public pension provision unless the value of the time discount factor of the government is sufficiently high. Moreover, we show that in an economy facing an aging population, an increase in social security provision for the old rather than an increase in public investment can be preferable from the viewpoint of social welfare.     

Taxation in an Overlapping Generations Model with Human Capital

We examine the impact of flat-rate taxes on intergenerational equity in an overlapping generations model of a small open economy, assuming the intergenerational externality of human capital accumulation. The externality may cause the difference between the growth rates in private human capital and in average human capital of the economy. If the externality is sufficiently small, the introduction of an interest income tax will benefit all future generations. In contrast, if it is sufficiently great, the introduction of a wage tax could harm all generations by raising financial asset holdings and thereby reducing consumption.     

Capital taxation and accumulation in a growing world economy with deficit finance

Prior analyses of the incidence of capital taxation have assumed that the government budget is balanced and changes in capital taxes affect either other taxes, transfers, or government expenditures. The general conclusion is that an increase in the capital tax rate will increase the gross-of-tax interest rate and decrease capital accumulation. This article examines the steady-state effects of capital taxation on the gross-of-tax interest rate and capital accumulation within a two-country model of overlapping generations, which allows capital taxation to directly affect government budget deficits. It is shown that, under the residence tax system, if the after-tax-interest rate is greater than the growth rate, an increase in the capital tax rate willdecrease the gross interest rate andincrease the capital-labor ratio. This result holds even under the territorial tax system, with some additional assumptions.     

Optimal Fiscal Policy with Consumption Taxation

We characterize optimal fiscal policies in a general equilibrium model with monopolistic competition and endogenous public spending. The government can tax consumption, as alternative to labor income taxes. Consumption taxation acts as indirect taxation of profits (intratemporal gains of taxing consumption) and enables the policymaker to manage the burden of public debt more efficiently (intertemporal gains of taxing consumption). We show analytically that these two gains imply that the optimal share of government spending is higher under consumption taxation than with labor income taxation. Then, we quantify numerically each of these gains by calibrating the model on the U.S. economy.     

环境税率、双重红利与经济增长

本文构建了一个包含环境税、污染存量和预期寿命的世代交替模型,研究环境税对环境红利和经济发展红利的影响。基于新古典增长模型的研究表明,环境税能够实现双重红利(环境红利和经济发展红利),这契合“绿水青山就是金山银山”的绿色发展理念。从传导机制看,环境税通过负收入效应使得资本积累下降,同时,环境税通过健康效应使得预期寿命延长,这又使得资本积累增加。环境税通过影响资本积累,进而影响环境质量和经济发展。此外,环境税率上升使得用于环境治理的政府支出增加,这使得经济更容易产生环境红利。基于内生增长框架的分析表明,环境税有助于摆脱“环境贫困陷阱”,这为解释国家之间的收入差距提供了一个参考机制。数值模拟结果显示,在新古典增长框架和内生增长框架下,均存在最优的环境税率可以极大化人均产出和经济增长率。本文认为,合理的环境税率有助于推进减污降碳协同治理。     

Optimal taxation and redistribution in an OLG model with unemployment

This paper concerns redistribution via nonlinear income taxation in an overlapping generations model with two ability-types. We assume that the wage rates are determined by bargaining between unions and firms, meaning that the equilibrium is characterized by involuntary unemployment. We show that the policy instruments that are used to calculate the marginal labor income tax rate for each ability-type give rise to intertemporal tax base effects. In addition, since the relationship between the employment and the capital stock implies intertemporal production inefficiency at the second best optimum, imperfect competition in the labor market may itself justify capital income taxation.      

Effects of Capital Gains Taxation on Life-Cycle Investment and Portfolio Management

We examine the impact of capital income taxation, both accrual forms of taxation and taxation of realized capital gains, on total savings and the demand for corporate financial instruments. We find that investors may hold both debt and equity in the face of effective collection of capital gains taxation even in a flat tax system. We also find that the two taxes will have substantially different effects on saving and consumption behavior, making it unlikely that the tax structure can be summarized by any single equivalent accrual tax rate.     

Optimal factor and commodity taxation in a small open economy

A two-sector trade model with specific factors and perfect international capital mobility is used to analyze the optimal mix of factor and commodity taxation in a small open economy that faces domestic or international constraints on its tax instruments. In the unconstrained benchmark case, the small country will tax specific factors and domestic consumption but chooses zero tax rates for a selective production tax (i.e., an origin-based commodity tax) and a source-based tax on capital income. When commodity taxation must follow a combination of origin and destination principles, then this mixed commodity tax rate will be positive and its production effects are partly compensated in the optimum by a capital subsidy. These international restrictions interact with domestic constraints when rents accruing to fixed factors cannot be taxed by a separate instrument, and a positive tax rate on capital serves as an indirect way of rent taxation.     

Capital Mobility and Source-Based Taxation of Capital Income in Small Open Economies

This paper examines the taxation of capital income in a small open economy that faces a highly elastic supply of internationally mobile capital and increasing tax competition. The analysis considers a wide variety of additional factors that affect the determination of capital income taxation policy, including the desire to tax economic rents earned by foreign and domestic firms, the desire to take advantage of any treasury transfer effects, the role played by transfer pricing and other financial accounting manipulations by foreign multinationals, the need for a backstop to the personal income tax and various political concerns. The paper evaluates several potential income and consumption-based tax reforms in this context. JEL Code: H21, H25, H87     

Uninsurable investment risks and capital income taxation

This paper studies the capital accumulation and welfare implications of reducing capital income taxation in a general equilibrium economy with uninsurable investment risks. It has been shown that, with uninsurable investment risks, under-accumulation of capital may result compared to the complete markets economy. We show that reducing somewhat the capital income tax rate increases the capital stock and leads to a welfare gain. The complete elimination of the capital income tax, however, is not necessarily welfare improving.     

A normative analysis of capital income taxes in the presence of aggregate risk

A simple portfolio model is used to examine the efficiency effects of capital income taxes when the economy faces aggregate risk. To achieve a first best optimum the use of state contingent lump sum taxes is required. Through the tax policy the riskiness of total consumption is partly assigned to the private consumption and partly to the public consumption. State independent income taxes may generate a misallocation of risk and distort the allocation of resources between assets. The second best optimum, representing a trade-off between these inefficiencies, is characterized. Uniform taxation is shown to be optimal only in very special cases. Finally, the second best optimality rule for public consumption is extended to the case of uncertainty.     

权衡中的创新——双元所得税评介

双元所得税是与综合所得税、单一税并列的一种个人所得税的主要模式,其特征为双元税基、双元税率和限制优惠。双元所得税的优点是兼顾了税收收入和国际竞争力、兼顾了效率和一定程度的收入再分配、避免了对资本的重复课税、降低了由于通货膨胀带来的对资本所得的过度课税、简化了税制。双元所得税契合了北欧各国社会经济状况对税制的要求,因此,成为北欧国家个人所得税的首选模式。     

The theory of optimal taxation: what is the policy relevance?

The paper discusses the implications of optimal tax theory for the debates on uniform commodity taxation and neutral capital income taxation. While strong administrative and political economy arguments in favor of uniform and neutral taxation remain, recent advances in optimal tax theory suggest that the information needed to implement the differentiated taxation prescribed by optimal tax theory may be easier to obtain than previously believed. The paper also points to the strong similarity between optimal commodity tax rules and the rules for optimal source-based capital income taxation.      

Nonoptimality of the Friedman Rule with Capital Income Taxation

This paper studies the efficient taxation of money and factor income in intertemporal optimizing growth models with infinite horizons, transaction costs technologies, and flexible prices. Second‐best optimality calls for a positive inflation tax and a nonzero capital income tax when there are restrictions on taxation of production factors or profits/rents. Our cases of nonoptimality of the Friedman rule—which differ from those of Mulligan and Sala‐i‐Martin (1997) and extend substantially those of Schmitt‐Grohè and Uribe (2004a) —follow from the violation of the Diamond and Mirrlees (1971) principle on production efficiency.