From Optimal Tax Theory to Applied Tax Policy

Jacobs, Bas

doi:10.1628/001522113x671155

Cited by 27 publications

(15 citation statements)

References 101 publications

(112 reference statements)

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“…The previous section summarises the taxation of homeownership in Belgium. The central question in this section is whether this taxation can be called optimal in the sense that no reforms can increase societal welfare, regardless of how this is defined (Heady, 1993;Jacobs, 2013). Mirrlees et al (2011b, p. 332-333) describe such a "good tax system" as follows:…”

Section: Optimal Taxationmentioning

confidence: 99%

“…2 One of the few exceptions to this statement is a lump sum tax for which the tax amount is not linked to ability to pay and can, therefore, not be changed by the taxpayer by changing behaviour. The literature regards it as first-best alternative (Feldstein, 1976;Jacobs, 2013;Mirrlees et al, 2011a, p. 31). Any other taxation, including optimal taxation, is regarded as a second-best alternative because of the resulting difference in price between the demand for and supply of goods or services.…”

Section: )mentioning

confidence: 99%

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Homeownership taxation in Flanders: moving towards ‘optimal taxation’?

Haffner

Winters

2015

International Journal of Housing Policy

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Belgium devolved administrative and budgetary responsibility for the favourable income tax treatment of owner-occupied dwellings to its administrative regions in July 2014. This change allowed the regions to redesign their housing-related tax instruments. This paper examines a tax policy reorientation of the Flemish Region according to the principles of the optimal tax theory based on the proposals of the British Mirrlees Review. These principles are used as a benchmark to determine whether owner-occupied housing is treated favourably via the tax system in Belgium. A brief comparison is also carried out with four other countries (Denmark, Germany, the Netherlands and the United Kingdom) in order to test for the use of these theoretical principles in other tax systems. Since none of the countries come close to optimal taxation and the Mirrlees Review is not uncontested, practice-based recommendations of international organisations are also taken into consideration. It has been determined that, recently, the Belgian tax system and more specifically Flemish homeownership taxation moved closer to what optimal taxation could be, but that this did not come about by explicitly considering the mechanisms of the tax system.

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Section: Optimal Taxationmentioning

confidence: 99%

Section: )mentioning

confidence: 99%

Homeownership taxation in Flanders: moving towards ‘optimal taxation’?

Haffner

Winters

2015

International Journal of Housing Policy

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“…Our survey complements earlier articles on the connection between optimal tax theory and tax policy, such as Mankiw et al . (2009), Banks and Diamond (2010), Diamond and Saez (2011), and Jacobs (2013). Our work also relates to the contemporary discussion about wealth taxation in several countries (see Boadway and Pestieau, 2019; Kopczuk, 2019; Saez and Zucman, 2019; Scheuer and Slemrod, 2019 for recent contributions).…”

Section: Introductionmentioning

confidence: 99%

How Should Capital Be Taxed?

Bastani

Waldenström

2020

Journal of Economic Surveys

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This survey discusses how capital should be taxed in advanced economies. We review the theoretical optimal tax literature, survey empirical studies on the distribution of capital and the distortionary costs of capital taxation, and analyze the desirability of specific taxes on capital income, wealth, property, inheritances, and corporate profits. Our overall conclusion is that capital taxation plays an important role in an optimal tax system, but only certain ways of taxing capital are able to strike a balance between optimality and administrative feasibility.

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“…It is not meant to serve as a normative policy prescription. Banks and Diamond (2010), Saez (2011) andJacobs (2013) have argued that capital income should be taxed at positive rates for various reasons that the framework of Chamley (1986) and Judd (1985) cannot address.…”

Section: Introductionmentioning

confidence: 99%

Why Is the Long-Run Tax on Capital Income Zero? Explaining the Chamley-Judd Result

Jacobs

Rusu

2017

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. (0)10 408 8900 Why is the Long-Run Tax on Capital Income Zero? Terms of use: Documents inExplaining the Chamley-Judd Result * Bas Jacobs * * and Alexandra Rusu * * * January 12, 2017Abstract Why is it optimal not to tax capital income in the long-run in Chamley (1986) and Judd (1985)? This paper demonstrates that the answer follows standard intuitions from the commodity tax literature. In the steady state, Engel curves for consumption are linear in labour earnings, irrespective of the utility function adopted. Thus, in the steady state, consumption demands in each period become equally complementary to leisure over time. This renders taxes on capital income redundant, since they cannot alleviate distortions from taxing labour income. The argument that taxes on capital income should be zero because distortions explode in finite time is relevant only if restrictions are imposed on the utility function. We show how these restrictions imply that consumption demands in each period are equally complementary to leisure over time. We also demonstrate that the optimal tax on capital income is zero irrespective of whether the gross interest rate is endogenous. This contradicts arguments that the entire burden of capital income taxes is shifted to labour through general-equilibrium effects on the interest rate. JEL-code: H2

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From Optimal Tax Theory to Applied Tax Policy

Cited by 27 publications

References 101 publications

Homeownership taxation in Flanders: moving towards ‘optimal taxation’?

Homeownership taxation in Flanders: moving towards ‘optimal taxation’?

How Should Capital Be Taxed?

Why Is the Long-Run Tax on Capital Income Zero? Explaining the Chamley-Judd Result

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