Spencer Bastani, Daniel Waldenström, 09 November 2020

How should capital be taxed in advanced economies? This column presents a survey of the recent literature on optimal capital taxation and empirical studies on the distortionary effects of capital taxes. It provides specific analyses for taxes on wealth, property, inheritance, personal capital income, and corporate profits. Its overall conclusion is that capital taxation is part of an optimal tax system, but not all capital taxes strike a balance between optimality and administrative feasibility.

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