Working Paper

Optimal indirect and capital taxation

Abstract: In this paper, we consider an environment in which agents? productivities are private information, potentially multi-dimensional, and follow arbitrary stochastic processes. We allow for arbitrary incentive-compatible and physically feasible tax schemes. We prove that it is typically Pareto optimal to have positive capital taxes. As well, we prove that in any given period, it is Pareto optimal to tax consumption goods at a uniform rate.

Keywords: Taxation;

Status: Published in Federal Reserve Bank of Minneapolis Staff Report 293

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Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Working Papers

Publication Date: 2001

Number: 615