Original scientific paper
https://doi.org/10.1080/1331677X.2022.2142828
Technological progress and optimal income taxation
Insook Lee
Abstract
Facing technological progress, how should a government reform
income taxation? To address this question, optimal capital and
labor income taxation is obtained for an economy of heterogeneous
individuals. Technological progress raises optimal capital
income tax rate and lowers optimal average marginal labor
income tax rate if it is capital-biased by increasing relative capital
productivity. Technological progress does the opposite if it is
labor-biased by decreasing relative capital productivity. Neither
capital-biased nor labor-biased technological progress affects optimal
slope of labor income tax rate schedule. Technological progress
does not affect optimal income taxation if it is unbiased by
preserving relative capital productivity.
Keywords
Capital-biased technological progress; unbiased technological progress; optimal income taxation; relative capital productivity
Hrčak ID:
306800
URI
Publication date:
30.4.2023.
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