Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105106
Authors: 
Scheuer, Florian
Wolitzky, Alexander
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 5098
Abstract: 
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.
Subjects: 
wealth inequality
capital taxation
coalition formation
Document Type: 
Working Paper

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