American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Redistributive Capital Taxation Revisited
American Economic Journal: Macroeconomics
vol. 16,
no. 2, April 2024
(pp. 182–216)
Abstract
This paper uses a rich quantitative model with endogenous skill acquisition to show that capital-skill complementarity provides a quantitatively significant rationale to tax capital for redistributive governments. The optimal capital income tax rate is 67 percent, while it is 61 percent in an identically calibrated model without capital-skill complementarity. The skill premium falls from 1.9 to 1.84 along the transition following the optimal reform in the capital-skill complementarity model, implying substantial indirect redistribution from skilled to unskilled workers. These results show that a redistributive government should take into account capital-skill complementarity when taxing capital.Citation
Kina, Özlem, Ctirad Slavík, and Hakki Yazici. 2024. "Redistributive Capital Taxation Revisited." American Economic Journal: Macroeconomics 16 (2): 182–216. DOI: 10.1257/mac.20200395Additional Materials
JEL Classification
- D31 Personal Income, Wealth, and Their Distributions
- H21 Taxation and Subsidies: Efficiency; Optimal Taxation
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- 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)
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials