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Optimal Capital Income Taxation with Means-tested Benefits

Colleagues analysing data

Cagri Kumru and John Piggott

This paper studies the interaction between capital income taxation and a means tested age pension in the context of an overlapping generations model, calibrated to the UK economy.

Recent literature has suggested a rehabilitation of capital income taxation (Conesaet al. (2009)), predicated on the idea that capital is a complement with retirement leisure. This leads naturally to the conjecture that a publicly funded age pension contingent upon holdings of capital or capital income may have a similar effect.

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