Article

Non-linear Capital Taxation Without Commitment

Emmanuel Farhi, Christopher Sleet, Ivan Werning, and Sevin Yeltekin

Abstract

We study efficient non-linear taxation of labour and capital in a dynamic Mirrleesian model incorporating political economy constraints. Policies are chosen sequentially over time, without commitment. Our main result is that the marginal tax on capital income is progressive, in the sense that richer agents face higher marginal tax rates.

Keywords

Capital taxation; Political economy; Progressivity; Mirrlees;

JEL codes

  • D72: Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior
  • D86: Economics of Contract: Theory
  • E61: Policy Objectives • Policy Designs and Consistency • Policy Coordination
  • H21: Efficiency • Optimal Taxation

Reference

Emmanuel Farhi, Christopher Sleet, Ivan Werning, and Sevin Yeltekin, “Non-linear Capital Taxation Without Commitment”, The Review of Economic Studies, vol. 79, 2012, pp. 1469–1493.

See also

Published in

The Review of Economic Studies, vol. 79, 2012, pp. 1469–1493