Abstract
This paper addresses the optimal mix of capital and wage taxation when policymakers maximize the political support of workers and capitalists, subject to a fixed revenue requirement. Capital market integration increases the efficiency costs of a tax on capital hut simultaneously changes the political equilibrium through its effect on the distribution of factor incomes. These distributional effects are directly opposed in the capital importing and the capital exporting region. While the capital tax rate will always be lowered in the capital importing region, the tax rate in the exporting country will rise when political resistance to market-induced changes in the distribution of income is sufficiently high.
Item Type: | Journal article |
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Faculties: | Economics Economics > Chairs > Seminar for Economic Policy |
Subjects: | 300 Social sciences > 330 Economics |
Language: | English |
Item ID: | 20390 |
Date Deposited: | 15. Apr 2014, 08:58 |
Last Modified: | 29. Apr 2016, 09:17 |