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Working paper

Динамическая согласованность оптимального налогообложения

Arefiev N.
Governments are tempted to occasionally revise fiscal policy by increasing sales taxes or introducing a temporary high tax levy on capital income, because such sudden, unexpected policy revisions produce a wealth expropriation effect, whose efficiency is comparable to lump-sum taxation. However, expectations of wealth expropriation produce the opposite effect of a lump-sum subsidy and motivate the government to decrease the consumption tax and temporarily subsidize capital. When expected and realized expropriations coincide, the government faces exactly the same attainable resource allocation set and provides the same policy, as if there were neither expected nor realized expropriation at all. The Ramsey-optimal policy is then dynamically consistent, implies a near-zero capital income taxation from the beginning of the implementation of the optimal policy, and requires some endogenous adjustment of consumption and labor taxes at the beginning of the policy’s implementation.