American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Demographics and the Politics of Capital Taxation in a Life-Cycle Economy
American Economic Review
vol. 100,
no. 1, March 2010
(pp. 337–63)
Abstract
This article studies the effects of demographics on the mix of tax rates on labor and capital. It uses a quantitative general-equilibrium, overlapping-generations model where tax rates are voted without past commitments in every period and characterized as a Markov equilibrium. In the United States, the younger voting-age population in 1990 compared to 1965 accounts for the observed decline in the relative capital tax rate between those two years. A younger population raises the net return to capital, leads voters to increase their savings, and results in a preference for lower taxes on capital. Conversely, aging might increase capital taxation. (JEL E13, H24, H25, J11)Citation
Mateos-Planas, Xavier. 2010. "Demographics and the Politics of Capital Taxation in a Life-Cycle Economy." American Economic Review, 100 (1): 337–63. DOI: 10.1257/aer.100.1.337Additional Materials
JEL Classification
- E13 General Aggregative Models: Neoclassical
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- J11 Demographic Trends and Forecasts; General Migration