Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/286506 
Year of Publication: 
2019
Citation: 
[Journal:] SERIEs - Journal of the Spanish Economic Association [ISSN:] 1869-4195 [Volume:] 10 [Issue:] 3/4 [Year:] 2019 [Pages:] 419-438
Publisher: 
Springer, Heidelberg
Abstract: 
This paper studies the role of intangible capital investment in the timing of optimal capital income tax reforms. Within an infinitely lived worker-capitalist model as in Judd (J Public Econ 28:59-83, 1985), we consider two different economies: one in which capitalists devote physical investment, management time and intangible capital investment to build capital; and a second one in which capitalists do not need to devote intangible capital investment. We perform a Pareto-improving Ramsey tax reform and compare the optimal paths of corporate and dividend taxes during the transition with and without intangible capital. Without intangible investment, optimal corporate income taxes are set at 100% for 10 years and then fall to 0%, while optimal dividend taxes are set to 78% initially and follow a steep decline to 37% over 10 years. With intangible investment, optimal corporate income taxes are set to - 20% initially and slowly converge toward zero, while dividend income taxes are set to 61% initially and follow a slow decline to 27% over 50 years.
Subjects: 
Optimal policy
Capital taxes
Intangible investment
JEL: 
E62
H23
H25
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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