scholarly journals Positive Long-Run Capital Taxation: Chamley-Judd Revisited

2020 ◽  
Vol 110 (1) ◽  
pp. 86-119 ◽  
Author(s):  
Ludwig Straub ◽  
Iván Werning
Keyword(s):  
Slow Rate ◽  
Elasticity Of Substitution ◽  
Tax Rates ◽  
Capital Taxation ◽  
Tax Base ◽  
Long Run ◽  
Capital Tax ◽  
Consumption Taxes ◽  
Main Model ◽  
Do So

According to the Chamley-Judd result, capital should not be taxed in the long run. In this paper, we overturn this conclusion, showing that it does not follow from the very models used to derive it. For the main model in Judd (1985), we prove that the long-run tax on capital is positive and significant, whenever the intertemporal elasticity of substitution is below one. For higher elasticities, the tax converges to zero but may do so at a slow rate, after centuries of high tax rates. The main model in Chamley (1986) imposes an upper bound on capital taxes. We provide conditions under which these constraints bind forever, implying positive long-run taxes. When this is not the case, the long-run tax may be zero. However, if preferences are recursive and discounting is locally nonconstant (e.g., not additively separable over time), a zero long-run capital tax limit must be accompanied by zero private wealth (zero tax base) or by zero labor taxes (first-best). Finally, we explain why the equivalence of a positive capital tax with ever-increasing consumption taxes does not provide a firm rationale against capital taxation. (JEL H21, H25)

ENTREPRENEURIAL LABOR AND CAPITAL TAXATION

2010 ◽  
Vol 15 (3) ◽  
pp. 326-335 ◽  
Author(s):  
Catarina Reis
Keyword(s):  
Income Taxes ◽  
Income Taxation ◽  
Labor Income ◽  
Capital Taxation ◽  
Capital Income ◽  
Capital Income Taxation ◽  
Optimal Tax ◽  
Long Run ◽  
Capital Tax ◽  
The Government

This paper considers a Ramsey model of linear taxation for an economy with capital and two kinds of labor. If the government cannot distinguish between the return from capital and the return from entrepreneurial labor, then there will be positive capital income taxation, even in the long run. This happens because the only way to tax entrepreneurial labor is by also taxing capital. Furthermore, under fairly general conditions, the optimal tax on observable labor income is higher than the capital tax, although both are strictly positive. Thus, even though both income taxes are positive, imposing uniform income taxation would lead to additional distortions in the economy.

AN EVALUATION OF CONSTITUTIONAL CONSTRAINTS ON CAPITAL TAXATION

2016 ◽  
Vol 21 (7) ◽  
pp. 1519-1544 ◽  
Author(s):  
Begoña Domínguez ◽  
Zhigang Feng
Keyword(s):  
Incentive Compatibility ◽  
Income Taxes ◽  
Limited Commitment ◽  
Labor Income ◽  
Tax Rates ◽  
Capital Taxation ◽  
Capital Tax ◽  
Constitutional Constraints ◽  
Compatibility Constraint ◽  
Sustainable Equilibrium

This paper investigates the desirability of constitutional constraints on capital taxation in an environment without government debt and where benevolent governments have limited commitment. In our setup, governments can choose proportional capital and labor income taxes subject to the constitutional constraint but cannot commit to an actual path of taxes. First, we explore a form of constitutional constraint: a constant cap on capital tax rates. In our quantitative exercise, we show that a three percent cap on capital taxes provides the highest welfare at the worst sustainable equilibrium. However, such a cap decreases welfare at the best sustainable equilibrium (both because it constrains feasibility and because it tightens the incentive compatibility constraint). Second, we identify a form of constitutional constraint that can improve all sustainable equilibria. That constraint features a cap on capital taxes that increases with the level of capital.

scholarly journals Demographics and the Politics of Capital Taxation in a Life-Cycle Economy

2010 ◽  
Vol 100 (1) ◽  
pp. 337-363 ◽  
Author(s):  
Xavier Mateos-Planas
Keyword(s):  
Overlapping Generations ◽  
The United States ◽  
Tax Rates ◽  
Capital Taxation ◽  
Overlapping Generations Model ◽  
Tax Rate ◽  
Cycle Economy ◽  
Voting Age ◽  
Capital Tax ◽  
Markov Equilibrium

This article studies the effects of demographics on the mix of tax rates on labor and capital. It uses a quantitative general-equilibrium, overlapping-generations model where tax rates are voted without past commitments in every period and characterized as a Markov equilibrium. In the United States, the younger voting-age population in 1990 compared to 1965 accounts for the observed decline in the relative capital tax rate between those two years. A younger population raises the net return to capital, leads voters to increase their savings, and results in a preference for lower taxes on capital. Conversely, aging might increase capital taxation. (JEL E13, H24, H25, J11)

Local Sales Tax Competition and the Effect on County Governments' Tax Rates and Tax Bases

2004 ◽  
Vol 26 (1) ◽  
pp. 43-61 ◽  
Author(s):  
LeAnn Luna
Keyword(s):  
Local Governments ◽  
Predatory Behavior ◽  
Sales Tax ◽  
Tax Rates ◽  
Tax Base ◽  
County Governments ◽  
Tax Rate ◽  
Goods And Services ◽  
Cross Border ◽  
Long Run

Local governments can try to attract retail sales by keeping sales tax rates low and encouraging residents of other jurisdictions to cross-border shop. This predatory behavior must be balanced against the governments' desire to raise revenues. This study examines the extent to which local governments compete and attempt to limit cross-border shopping by changing sales tax rates. I estimate two equations, local sales tax rate and local sales tax base, in the short and long run. The local sales tax rate equation represents the county's tax policy choices and the sales tax base equation represents the demand function for the county businesses' taxable goods and services. The regression results show local governments do consider the sales tax rates of neighboring counties in setting their own rates in both the short and long run. The study also provides evidence that the sales tax rates of the home and competing counties will affect the sales tax base of the home county because shoppers will cross borders to take advantage of differences in tax rates between counties.

Relative effective taxation and income inequality: Evidence from OECD countries

2017 ◽  
Vol 27 (1) ◽  
pp. 57-76 ◽  
Author(s):  
Maria Iosifidi ◽  
Nikolaos Mylonidis
Keyword(s):  
Panel Data ◽  
Income Inequality ◽  
Oecd Countries ◽  
Tax Rates ◽  
Effective Tax Rates ◽  
Data Set ◽  
Capital Tax ◽  
Consumption Taxes ◽  
Redistributive Effect ◽  
Over Time

Using a panel data set of effective tax rates that are directly comparable across Organization for Economic Co-operation and Development (OECD) countries and over time, we investigate the redistributive effect of labour, consumption and capital tax rates. We show that what matters from a redistributive standpoint is the tax mix rather than the tax rates in isolation from the rest. The results suggest that increasing the tax burden on labour or consumption relative to capital leads to higher income inequality. In contrast, greater reliance on labour taxes relative to consumption taxes improves income equality. This effect likely stems from the redistributive objectives of social security contributions incorporated in labour taxes.

Evolution of the number of communicative civilizations in the Galaxy: implications on Fermi paradox

2020 ◽  
Vol 19 (4) ◽  
pp. 314-319
Author(s):  
Giorgio Spada ◽  
Daniele Melini
Keyword(s):  
Power Law ◽  
Slow Rate ◽  
Rate Of Growth ◽  
Long Run ◽  
Rate Of Increase ◽  
The Galaxy ◽  
Zero Number

AbstractIt has been recently proposed DeVito [(2019) On the meaning of Fermi's paradox. Futures, 389–414] that a minimal number of contacts with alien radio-communicative civilizations could be justified by their logarithmically slow rate of growth in the Galaxy. Here we further develop this approach to the Fermi paradox, with the purpose of expanding the ensemble of the possible styles of growth that are consistent with the hypothesis of a minimal number of contacts. Generalizing the approach in DeVito (2019), we show that a logarithmic style of growth is still found. We also find that a style of growth following a power law would be admissible, however characterized by an exponent less than one, hence describing a sublinear increase in the number of communicative civilizations, still qualitatively in agreement with DeVito (2019). No solutions are found indicating a superlinear increase in the number of communicative civilizations, following for example an exponentially diverging law, which would cause, in the long run, an unsustainable proliferation. Although largely speculative, our findings corroborate the idea that a sublinear rate of increase in the number of communicative civilizations in the Galaxy could constitute a further resolution of Fermi paradox, implying a constant and minimal – but not zero – number of contacts.

scholarly journals The Fiscal Effects of Tax Increment Financing on Rural School Districts: The Case of Iowa

AERA Open ◽  
2021 ◽  
Vol 7 ◽  
pp. 233285842199114
Author(s):  
Phuong Nguyen-Hoang
Keyword(s):  
Rural Communities ◽  
School Districts ◽  
Property Tax ◽  
Rural School ◽  
Tax Rates ◽  
Rural School Districts ◽  
Tax Increment Financing ◽  
Tax Base ◽  
Positive Effects ◽  
Development Tool

Tax increment financing (TIF)—an economic (re)development tool originally designed for urban cities—has been available to rural communities for decades. This is the first study to focus solely on TIF in rural school districts, to examine TIF effects on school districts’ property tax base and rates, and to conduct event-study estimations of TIF effects. The study finds that TIF has mostly positive effects on rural school districts’ property tax base and mixed effects on property tax rates, and that TIF-induced increases in tax base come primarily from residential property and slightly from commercial property. The study’s findings assert the importance of returned excess increment if rural school districts in Iowa and many other states are to benefit from TIF.

Shopping for Lower Sales Tax Rates

2021 ◽  
Vol 13 (3) ◽  
pp. 209-250
Author(s):  
Scott R. Baker ◽  
Stephanie Johnson ◽  
Lorenz Kueng
Keyword(s):  
Shopping Behavior ◽  
Sales Tax ◽  
Fixed Costs ◽  
Tax Rates ◽  
Inventory Problem ◽  
Sales Taxes ◽  
Long Run ◽  
Wide Range ◽  
Short Run ◽  
State And Local

Using comprehensive high-frequency state and local sales tax data, we show that shopping behavior responds strongly to changes in sales tax rates. Even though sales taxes are not observed in posted prices and have a wide range of rates and exemptions, consumers adjust in many dimensions. They stock up on storable goods before taxes rise and increase online and cross-border shopping in both the short and long run. The difference between short- and long-run spending responses has important implications for the efficacy of using sales taxes for countercyclical policy and for the design of an optimal tax framework. Interestingly, households adjust spending similarly for both taxable and tax-exempt goods. We embed an inventory problem into a continuous-time consumption-savings model and demonstrate that this behavior is optimal in the presence of shopping trip fixed costs. The model successfully matches estimated short-run and long-run tax elasticities. We provide additional evidence in favor of this new shopping complementarity mechanism. (JEL E21, E32, G51, H21, H25, H71)

The Income Elasticity of Gross Sports Betting Revenues in Nevada: Short-Run and Long-Run Estimates

2021 ◽  
pp. 152700252110369
Author(s):  
Ege Can ◽  
Mark W. Nichols
Keyword(s):  
Income Elasticity ◽  
Similar Rate ◽  
Sports Betting ◽  
Tax Base ◽  
Income Elasticities ◽  
Long Run ◽  
Sports Gambling ◽  
The Supreme Court ◽  
Short Run ◽  
State Income

In May 2018, the Supreme Court overturned the Professional and Amateur Sports Protection Act, thereby allowing all states to offer sports betting. Prior to this, Nevada was the only state with unrestricted sports betting. Using sports betting data from Nevada, we estimate long-run and short-run income elasticities to determine the growth and volatility of sports betting as a tax base. Sports gambling grows at a similar rate as state income and is stable and insensitive to short-run shocks to income. However, the amount of money kept by casinos, and hence the state, is small compared to other traditional tax bases.

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