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The distributional effects of progressive capital taxes

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  • Ricardo T. Fernholz

Abstract

Rising inequality since the 1980s has spurred much research examining the underlying causes and potential policy responses. Among the more controversial, One of the more controversial policy proposals is a progressive capital tax in response to rising top wealth shares around the world proposes a progressive capital tax in response to rising top wealth shares around the world. This paper introduces rank-based econometric methods for dynamic power laws as a tool for estimating the effect of progressive capital taxes on the distribution of wealth under different assumptions about the impact of these taxes on household behavior. In most scenarios, we find that a small tax levied on 1% of households would substantially reshape the US wealth distribution and reduce inequality.

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  • Ricardo T. Fernholz, 2017. "The distributional effects of progressive capital taxes," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 20(2), pages 99-112, April.
    • Handle: RePEc:taf:jecprf:v:20:y:2017:i:2:p:99-112
    DOI: 10.1080/17487870.2017.1294074
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    Cited by:

    1. Max Franks & David Klenert & Anselm Schultes & Kai Lessmann & Ottmar Edenhofer, 2018. "Is capital back? The role of land ownership and savings behavior," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(5), pages 1252-1276, October.

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