Taxing capital income: a bad idea. From: Federal Reserve Bank of Minneapolis Quarterly Review | Date: June 22, 1999| Author: | COPYRIGHT 1999 Federal Reserve Bank of Minneapolis. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan.  All inquiries regarding rights should be directed to the Gale Group.Copyright information

Recent economic theories assert that it is proper to implement zero capital income taxation, an idea first suggested by Chamley in 1986. Other theories support Chamley's findings, contradictory to the traditional view of heavy taxation for capital income since the model used involved a saving rate that is a fixed fraction of income. An extension of the work of Chamley puts the optimal capital income tax at zero and states that the rule holds to the short term as well.

Corporate profits. Capital gains. Dividend and interest income. These are just a few of the types of capital income that ...