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Capital Wealth Taxation: Theory and Application

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  • James Yunker

Abstract

Using an ls model analysis, the economic effects of implementing a modest taxation rate on capital wealth (3%) are found to be basically favorable: slightly higher output, lower inequality as measured by various Gini coefficients, and higher social welfare according to the three major social welfare functions-Bentham, Nash and Rawls. Implementing capital wealth taxation enables a compensating reduction in the labor-income taxation rate. The single most important consequence of this change is increased labor output among the wealthiest households, whose labor productivity is highest. Even though labor output is reduced among less-wealthy households, the overall effect on aggregate output is positive.

Suggested Citation

  • James Yunker, 2014. "Capital Wealth Taxation: Theory and Application," Review of Political Economy, Taylor & Francis Journals, vol. 26(1), pages 85-110, January.
    • Handle: RePEc:taf:revpoe:v:26:y:2014:i:1:p:85-110
    DOI: 10.1080/09538259.2013.874193
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    References listed on IDEAS

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    1. Jane G. Gravelle, 1994. "The Economic Effects of Taxing Capital Income," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262071584, April.
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    Cited by:

    1. Yunker James A., 2013. "The Basic Income Guarantee: A General Equilibrium Evaluation," Basic Income Studies, De Gruyter, vol. 8(2), pages 203-233, December.
    2. Yunker, James A., 2016. "Economic inequality and optimal redistribution: A theoretical and empirical analysis," Journal of Policy Modeling, Elsevier, vol. 38(3), pages 528-552.

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