Rent taxation and its intertemporal effects in a small open economy

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  • Marko Köthenbürger
  • Panu Poutvaara
Previous literature concludes that replacing wage taxation by taxes on a fixed factor or its rents benefits future generations. However, the effects of such steady-state gains on the transition generations have been left open. In this paper, we show that taxation of rents may also increase utility of the current generation provided tax revenues are earmarked to reduce wage taxes. In particular, a shift in the tax mix may yield an intergenerational Pareto-improvement when the initially prevailing tax mix is sufficiently skewed toward wage taxation.
Original languageEnglish
JournalInternational Tax and Public Finance
Volume16
Issue number5
Pages (from-to)697-709
Number of pages13
ISSN0927-5940
DOIs
Publication statusPublished - 2009

ID: 12236716