American Economic Review Vol. 100 No. 1 2010
Demographics and the Politics of Capital Taxation in a Life-Cycle Economy
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.
- DOI
- 10.1257/aer.100.1.337
- Volume
- 100
- Issue
- 1
- Pages
- 337-363
- Language
- en
- Sources
- crossref openalex bibtex:phds-export.bib