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Project Citation: 

Conesa, Juan Carlos, Kitao, Sagiri, and Krueger, Dirk. Replication data for: Taxing Capital? Not a Bad Idea after All! Nashville, TN: American Economic Association [publisher], 2009. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E113284V1

Project Description

Summary:  View help for Summary We quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic, uninsurable income shocks and permanent productivity differences of households. The optimal capital income tax rate is significantly positive at 36 percent. The optimal progressive labor income tax is, roughly, a flat tax of 23 percent with a deduction of $7,200 (relative to average household income of $42,000). The high optimal capital income tax is mainly driven by the life-cycle structure of the model, whereas the optimal progressivity of the labor income tax is attributable to the insurance and redistribution role of the tax system. (JEL E13, H21, H24, H25)

Scope of Project

JEL Classification:  View help for JEL Classification
      E13 General Aggregative Models: Neoclassical
      H21 Taxation and Subsidies: Efficiency; Optimal Taxation
      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)


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