The timing of optimal capital income tax reforms: The role of intangible capital investment

Artikel

This paper studies the role of intangible capital investment in the timing of optimal capital income tax reforms. Within an infinitely lived worker-capitalist model as in Judd (J Public Econ 28:59-83, 1985), we consider two different economies: one in which capitalists devote physical investment, management time and intangible capital investment to build capital; and a second one in which capitalists do not need to devote intangible capital investment. We perform a Pareto-improving Ramsey tax reform and compare the optimal paths of corporate and dividend taxes during the transition with and without intangible capital. Without intangible investment, optimal corporate income taxes are set at 100% for 10 years and then fall to 0%, while optimal dividend taxes are set to 78% initially and follow a steep decline to 37% over 10 years. With intangible investment, optimal corporate income taxes are set to - 20% initially and slowly converge toward zero, while dividend income taxes are set to 61% initially and follow a slow decline to 27% over 50 years.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: SERIEs - Journal of the Spanish Economic Association ; ISSN: 1869-4195 ; Volume: 10 ; Year: 2019 ; Issue: 3/4 ; Pages: 419-438

Classification and Topics

• Classification: Wirtschaft ; Fiscal Policy ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Business Taxes and Subsidies including sales and value-added (VAT)
• Subject: Optimal policy ; Capital taxes ; Intangible investment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Conesa, Juan Carlos ; Domínguez, Begoña
• Event: Veröffentlichung
• (who): Springer
• (where): Heidelberg
• (when): 2019

Further information

• DOI: doi:10.1007/s13209-019-0199-3
• Last update: 10.03.2025, 11:44 AM CET