Working Paper: NBER ID: w12259
Authors: Louis Kaplow
Abstract: The merits of capital levies depend on the likelihood of repetition, the extent of anticipation, and its effects on distribution. The relevance of these features, which in varying degrees is underdeveloped or underappreciated in pertinent literatures, is elaborated and then considered with regard to the problem of transition to a consumption tax. Other transition issues are distinguished, and specific attention is devoted to rate changes under a consumption tax and whether owners of preexisting capital are effectively compensated through higher net-of-tax returns due to repeal of the income tax. The analysis is also related to literature that examines dynamic models of taxation, particularly work simulating consumption tax transitions and assessing the optimality of capital taxation in the long run.
Keywords: No keywords provided
JEL Codes: H21; H23; H24; H25; K34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| likelihood of repetition of capital levies (G32) | deter capital accumulation (E22) |
| anticipation of capital levies (H26) | accelerate consumption (E21) |
| anticipation of capital levies (H26) | avoid long-term investments (G31) |
| anticipated capital levies (F38) | distort investment decisions (G11) |
| capital levies (F38) | disproportionately affect older individuals with accumulated capital (J14) |
| capital levies (F38) | benefit younger individuals from higher future returns (D15) |