Demographics and the Politics of Capital Taxation in a Life-Cycle Economy
American Economic Review
vol. 100,
no. 1, March 2010
(pp. 337-63)
Abstract
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)Citation
Mateos-Planas, Xavier. 2010. "Demographics and the Politics of Capital Taxation in a Life-Cycle Economy." American Economic Review, 100 (1): 337-63. DOI: 10.1257/aer.100.1.337Additional Materials
JEL Classification
- E13 General Aggregative Models: Neoclassical
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- J11 Demographic Trends and Forecasts; General Migration