Approaches to efficient capital taxation: leveling the playing field vs. living by the Golden Rule

Article Abstract:

An analysis of the Tax Reform Act of 1986 is presented. The analysis focuses on the act's intertemporal and intersectional efficiency impact by applying a general equilibrium model. The model considers the influence of taxes on capital allocation for industries, assets, sectors and time. It is shown that the 1986 act yielded a negative efficiency effect but balanced this effect by improving intersectoral allocation and decreasing labor market variations.

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Should capital income be taxed in the steady state?

Article Abstract:

A new interpretation is given to the 'Chamley theorem' that holds that capital income should not be taxed in the steady state. The economic reasoning behind this dynamic optimal taxation principle is clarified by formulating an example where having a positive steady-state capital income tax is optimal. It is demonstrated that the Chamley result is associated to the reduction of distortions at the intertemporal margin.

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The taxation of mobile capital by central cities

Article Abstract:

The tax policy of a city and its effect on mobile capital and the development of the suburbs are discussed. The central city is capable of exploiting its suburban population through capital tax or the creation of subsidies that result in the decrease of work opportunities in the metropolitan area. Higher rental rates are an evidence of the city's implementation of policies designed to enhance urban life.

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