The Experts below are selected from a list of 30873 Experts worldwide ranked by ideXlab platform
Shu-chun Susan Yang - One of the best experts on this subject based on the ideXlab platform.
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The fiscal state-dependent effects of Capital Income Tax cuts
Journal of Economic Dynamics and Control, 2020Co-Authors: Alexandra Fotiou, Wenyi Shen, Shu-chun Susan YangAbstract:Using the post-WWII data of U.S. federal corporate Income Tax changes, within a Smooth Transition VAR, this paper finds that the output effect of Capital Income Tax cuts is government debt-dependent: it is less expansionary when debt is high than when it is low. To explore the mechanisms that can drive this fiscal state-dependent Tax effect, the paper uses a DSGE model with regime-switching fiscal policy and finds that a Capital Income Tax cut is stimulative to the extent that it is unlikely to result in a future fiscal adjustment. As government debt increases to a sufficiently high level, the probability of future fiscal adjustments starts rising, and the expansionary effects of a Capital Income Tax cut can diminish substantially, whether the expected adjustments are through a policy reversal or a consumption Tax increase. Also, a Capital Income Tax cut need not always have large revenue feedback effects as suggested in the literature.
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Do Capital Income Tax Cuts Trickle Down
National Tax Journal, 2007Co-Authors: Shu-chun Susan YangAbstract:Reductions in the Capital Income Tax rate generally stimulate investment and raise the marginal product of labor and the wage rate. Hence, it is often argued that cutting Capital Income Taxes benefits Capital owners and all workers. This result, however, depends on how government manages debt to maintain budget solvency. This paper analyzes the distributional effects of Capital Tax cuts, where endogenous adjustments in other Tax rates are precluded. When productive public investment or transfers to liquidity–constrained workers are reduced, it finds that the trickle–down effect may not hold. This paper also demonstrates a well–known fallacy: Tax liability changes are a poor proxy for welfare changes.
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Do Capital Income Tax Cuts Trickle Down
National Tax Journal, 2007Co-Authors: Shu-chun Susan YangAbstract:Reductions in the Capital Income Tax rate generally stimulate investment. A higher Capital stock, in turn, raises the marginal product of labor and the wage rate. Hence, it is often argued that cutting Capital Income Taxes benefits Capital owners and all workers. This result, however, depends on how government manages debt to maintain budget solvency. When productive public investment or transfers to liquidity-constrained workers are reduced, the trickle-down effect may not hold. This paper also demonstrates a well-known fallacy: Tax liability changes are a poor proxy for welfare changes.
Emmanuel Saez - One of the best experts on this subject based on the ideXlab platform.
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Optimal progressive Capital Income Taxes in the infinite horizon model
Journal of Public Economics, 2013Co-Authors: Emmanuel SaezAbstract:Abstract This paper analyzes optimal progressive Capital Income Taxation in an infinite horizon model where individuals differ only through their initial wealth. We consider progressive Capital Income Tax schedules taking a simple two-bracket form with an exemption bracket at the bottom and a single marginal Tax rate above a time varying exemption threshold. Individuals are Taxed until their wealth is reduced down to the exemption threshold. The fraction of individuals subject to Capital Income Taxation vanishes to zero in the long-run in analogy to the zero long-run Capital Tax result of Chamley and Judd with optimal linear Taxes. However, in contrast to linear Taxation, optimal nonlinear Capital Taxation can have a drastic impact on the long-run wealth distribution. When the intertemporal elasticity of substitution is not too large and the top tail of the initial wealth distribution is infinite and thick enough, the optimal exemption threshold converges to a finite limit. As a result, the optimal Tax system drives all the large fortunes down a finite level and produces a truncated long-run wealth distribution.
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Optimal Progressive Capital Income Taxes in the Infinite Horizon Model
2002Co-Authors: Emmanuel SaezAbstract:This paper analyzes optimal progressive Capital Income Taxation in an infinite horizon model where individuals differ only through their initial wealth. We show that, in that context, progressive Taxation is a much more powerful and efficient tool to redistribute wealth than linear Taxation on which previous literature has focused. We consider progressive Capital Income Tax schedules taking a simple two-bracket form with an exemption bracket at the bottom and a single marginal Tax rate above a time varying exemption threshold. Individuals are Taxed until their wealth is reduced down to the exemption threshold. When the intertemportal elasticity of substitution is not too large and the top tail of the initial wealth distribution is infinite and thick enough, the optimal exemption threshold converges to a finite limit. As a result, the optimal Tax system drives all the large fortunes down a finite level and produces a truncated long-run wealth distribution. A number of numerical simulations illustrate the theoretical result.
David F. Burgess - One of the best experts on this subject based on the ideXlab platform.
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reconciling alternative views about the appropriate social discount rate
Journal of Public Economics, 2013Co-Authors: David F. BurgessAbstract:This paper shows that, in an economy with an exogenous rate of return and a given Capital Income Tax distortion, and with lump sum Taxes as the marginal Tax instrument, the SOC and MCF criteria both correctly identify all worthwhile projects if the criteria are properly applied. The equivalence between the SOC and MCF criteria continues to hold i) if distortionary Taxes are used to balance the budget, and ii) if the rate of return to Capital is endogenous. Apparent differences between the SOC and MCF criteria arise from different definitions of a project's indirect revenue effect. Neither criterion has an implementation advantage because the information requirements for each are identical.
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Removing Some Dissonance From the Social Discount Rate Debate
2008Co-Authors: David F. BurgessAbstract:In an economy with a Capital Income Tax distortion, the social discount rate (SDR) should reflect the social opportunity cost of Capital rather than the social rate of time preference (consumption rate of interest) to ensure that public investments can produce Pareto improvements. The marginal cost of funds may exceed unity for a lump sum Tax, but it is irrelevant for project evaluation. Even if a social welfare improvement is judged to be possible without passing the compensation test, the SDR should still reflect the social opportunity cost of Capital to ensure that the project is the most efficient use of public funds.
Matthew Weinzierl - One of the best experts on this subject based on the ideXlab platform.
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preference heterogeneity and optimal Capital Income Taxation
Journal of Public Economics, 2013Co-Authors: Mikhail Golosov, Maxim Troshkin, Aleh Tsyvinski, Matthew WeinzierlAbstract:article i nfo We examine a prominent justification for Capital Income Taxation: goods preferred by those with high ability ought to be Taxed. In an environment where commodity Taxes are allowed to be nonlinear functions of Income and consumption, we derive an analytical expression that reveals the forces determining optimal commodity Taxation. We then calibrate the model to evidence on the relationship between skills and prefer- ences and extensively examine the quantitative case for Taxes on future consumption (saving). In our base- line case of a unit intertemporal elasticity, optimal Capital Income Tax rates are 2% on average and 4.5% on high earners. We find that the intertemporal elasticity of substitution has a substantial effect on optimal cap- ital Taxation. If the intertemporal elasticity is one-third, the optimal Capital Income Tax rates rise to 15% on average and 23% on high earners; if the intertemporal elasticity is two, the optimal rates fall to 0.6% on aver- age and 1.6% on high earners. Nevertheless, in all cases that we consider the welfare gains of using optimal Capital Taxes are small.
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Preference Heterogeneity and Optimal Capital Income Taxation
National Bureau of Economic Research, 2010Co-Authors: Mikhail Golosov, Maxim Troshkin, Aleh Tsyvinski, Matthew WeinzierlAbstract:We examine a prominent justification for Capital Income Taxation: goods preferred by those with high ability ought to be Taxed. In an environment where commodity Taxes are allowed to be nonlinear functions of Income and consumption, we derive an analytical expression that reveals the forces determining optimal commodity Taxation. We then calibrate the model to evidence on the relationship between skills and preferences and extensively examine the quantitative case for Taxes on future consumption (saving). In our baseline case of a unit intertemporal elasticity, optimal Capital Income Tax rates are 2% on average and 4.5% on high earners. We find that the intertemporal elasticity of substitution has a substantial effect on optimal Capital Taxation. If the intertemporal elasticity is one-third, optimal Capital Income Tax rates rise to 15% on average and 23% on high earners; if the intertemporal elasticity is two, optimal rates fall to 0.6% on average and 1.6% on high earners. Nevertheless, in all cases that we consider the welfare gains of using optimal Capital Taxes are small.
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optimal Taxation in theory and practice
National Bureau of Economic Research, 2009Co-Authors: Gregory N Mankiw, Matthew Weinzierl, Danny YaganAbstract:We highlight and explain eight lessons from optimal Tax theory and compare them to the last few decades of OECD Tax policy. As recommended by theory, top marginal Income Tax rates have declined, marginal Income Tax schedules have flattened, redistribution has risen with Income inequality, and commodity Taxes are more uniform and are typically assessed on final goods. However, trends in Capital Taxation are mixed, and Capital Income Tax rates remain well above the zero level recommended by theory. Moreover, some of theory's more subtle prescriptions, such as Taxes that involve personal characteristics, asset-testing, and history-dependence, remain rare in practice. Where large gaps between theory and policy remain, the difficult question is whether policymakers need to learn more from theorists, or the other way around.
Patrick J Kehoe - One of the best experts on this subject based on the ideXlab platform.
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optimal fiscal policy in a business cycle model
Journal of Political Economy, 1994Co-Authors: V V Chari, Lawrence J Christiano, Patrick J KehoeAbstract:This paper develops the quantitative implications of optimal fiscal policy in a business cycle model. In a stationary equilibrium, the ex ante Tax rate on Capital Income is approximately zero. There is an equivalence class of ex post Capital Income Tax rates and bond policies that support a given allocation. Within this class, the optimal ex post Capital Tax rates can range from close to independently and identically distributed to close to a random walk. The Tax rate on labor Income fluctuates very little and inherits the persistence properties of the exogenous shocks; thus there is no presumption that optimal labor Tax rates follow a random walk. Most of the welfare gains realized by switching from a Tax system like that of the United States to the Ramsey system come from an initial period of high Taxation on Capital Income.
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optimal fiscal policy in a business cycle model
Staff Report, 1993Co-Authors: V V Chari, Lawrence J Christiano, Patrick J KehoeAbstract:This paper develops the quantitative implications of optimal fiscal policy in a business cycle model. In a stationary equilibrium the ex ante Tax rate on Capital Income is approximately zero. There is an equivalence class of ex post Capital Income Tax rates and bond policies that support a given allocation. Within this class the optimal ex post Capital Tax rates can range from being close to i.i.d. to being close to a random walk. The Tax rate on labor Income fluctuates very little and inherits the persistence properties of the exogenous shocks and thus there is no presumption that optimal labor Tax rates follow a random walk. The welfare gains from smoothing labor Tax rates and making ex ante Capital Income Tax rates zero are small and most of the welfare gains come from an initial period of high Taxation on Capital Income.
