Published in:CESifo Working Paper Series ; No. 5098
Extent:
1 Online-Ressource (46 p)
Language:
English
DOI:
10.2139/ssrn.2540017
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 18, 2014 erstellt
Description:
This paper studies optimal dynamic tax policy under the threat of political reform. A policy will be reformed ex post if a large enough political coalition supports reform; thus, sustainable policies are those that will continue to attract enough political support in the future. We find that optimal marginal capital taxes are either progressive or U-shaped, so that savings are subsidized for the poor and/or the middle class but are taxed for the rich. U-shaped capital taxes always emerge when the salient reform threat consists of radically redistributing capital and individuals' political behavior is purely determined by economic motives