Cookies?
Library Header Image
LSE Research Online LSE Library Services

Capital income taxes with heterogeneous discount rates

Diamond, Peter and Spinnewijn, Johannes (2011) Capital income taxes with heterogeneous discount rates. American Economic Journal: Economic Policy, 3 (4). pp. 52-76. ISSN 1945-7731

Full text not available from this repository.

Abstract

With heterogeneity in both skills and discount factors, the Atkinson- Stiglitz theorem that savings should not be taxed does not hold. In a model with heterogeneity of preferences at each earnings level, introducing a savings tax on high earners or a savings subsidy on low earners increases welfare, regardless of the correlation between ability and discount factor. Extending Emmanuel Saez (2002), a uniform savings tax increases welfare if that correlation is sufficiently high. Key for the results is that types who value future consumption less are more tempted by a lower paid job. Some optimal tax results and empirical evidence are presented.

Item Type: Article
Official URL: http://www.aeaweb.org/aej-policy/index.php
Additional Information: © 2011 American Economic Association
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Personal Finance
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency; Optimal Taxation
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies
Sets: Departments > Economics
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 23 Feb 2012 15:00
URL: http://eprints.lse.ac.uk/42018/

Actions (login required)

Record administration - authorised staff only Record administration - authorised staff only