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The welfare loss from a capital income tax

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  • Jinyong Cai
  • Jagadeesh Gokhale

Abstract

A decomposition of the welfare loss from a capital income tax into its two components: the intertemporal (consuming today versus tomorrow) and the within-period or static (consuming durable versus nondurable goods). Its calculations, which use a calibrated life-cycle model with a representative consumer, suggest that ignoring the static distortion may lead to substantial underestimation of the total welfare loss.

Suggested Citation

  • Jinyong Cai & Jagadeesh Gokhale, 1997. "The welfare loss from a capital income tax," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 2-10.
    • Handle: RePEc:fip:fedcer:y:1997:i:qi:p:2-10
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    References listed on IDEAS

    as
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