Should capital income be taxed in the steady state?

Isabel H. Correia*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

59 Citations (Scopus)

Abstract

This paper provides a new economic interpretation of the well-known dynamic optimal taxation principle that capital income should not be taxed in the steady state. We show that the result is related to the minimization of distortions at the intratemporal margin. When every factor of production can be taxed at the optimal rate, capital income should not be taxed in the steady state. But when there are restrictions on the taxation of production factors, the tax rate on capital income in the steady state is different from zero.
Original languageEnglish
Pages (from-to)147-151
Number of pages5
JournalJournal of Public Economics
Volume60
Issue number1
DOIs
Publication statusPublished - Apr 1996

Keywords

  • Capital taxation
  • Optimal taxation

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