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Optimal Capital Income Taxation in the Case of Private Donations to Public Goods

Author

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  • Shigeo Morita

    (Graduate School of Economics, Osaka University)

  • Takuya Obara

    (Graduate School of Economics, Hitotsubashi University)

Abstract

In this study, we investigate optimal nonlinear labor and capital income tax- ation and subsidies for contribution goods in a dynamic setting. We show that when individuals can contribute to a public good|even if additive and separa- ble preference between consumption and labor supply is assumed and individuals differ only in earning ability|marginal capital income tax rate for low-income earners is not zero, indicating that the Atkinson{Stiglitz theorem does not hold. In particular, heterogeneous tastes for private consumptions endogenously occur. In addition, we derive a formula for optimal tax treatment of a public good, which is expressed in terms of the Pigouvian effect and the effect on an incentive com- patibility constraint.

Suggested Citation

  • Shigeo Morita & Takuya Obara, 2016. "Optimal Capital Income Taxation in the Case of Private Donations to Public Goods," Discussion Papers in Economics and Business 16-21, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:1621
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    References listed on IDEAS

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    1. Shigeo Morita & Takuya Obara, 2018. "Optimal capital income taxation in the case of private donations to public goods," Economics Bulletin, AccessEcon, vol. 38(2), pages 921-939.

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    More about this item

    Keywords

    Capital income tax; Private donations; Tax treatment;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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