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Journal Article

The welfare loss from a capital income tax


Abstract: A decomposition of the welfare loss from a capital income tax into its two components: the intertemporal (consuming today versus tomorrow) and the within-period or static (consuming durable versus nondurable goods). Its calculations, which use a calibrated life-cycle model with a representative consumer, suggest that ignoring the static distortion may lead to substantial underestimation of the total welfare loss.

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Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Economic Review

Publication Date: 1997

Issue: Q I

Pages: 2-10