Cui, W;
Miao, J;
(2025)
Taxing Sudden Capital Income Surges.
IMF Economic Review
10.1057/s41308-025-00280-3.
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Abstract
We study the impact of flat and progressive capital taxes in a continuous-time heterogeneous-agent incomplete markets model with sudden surges in capital income. We find that simple flat taxes on all capital income can increase wealth inequality relative to labor income inequality. But progressive taxes by taxing sudden surges at a higher rate can reduce wealth inequality and cause less distortion than flat taxation, provided that the government uses tax revenues to finance more public debt as liquidity for precautionary saving.
| Type: | Article |
|---|---|
| Title: | Taxing Sudden Capital Income Surges |
| DOI: | 10.1057/s41308-025-00280-3 |
| Publisher version: | https://doi.org/10.1057/s41308-025-00280-3 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10211130 |
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