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Creator: Chari, V. V., Nicolini, Juan Pablo, and Teles, Pedro Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 752 Abstract: We revisit the question of how capital should be taxed, arguing that if governments are allowed to use the kinds of tax instruments widely used in practice, for preferences that are standard in the macroeconomic literature, the optimal approach is to never distort capital accumulation. We show that the results in the literature that lead to the presumption that capital ought to be taxed for some time arise because of the initial confiscation of wealth and because the tax system is restricted.
Parola chiave: Long run, Capital income tax, and Uniform taxation Soggetto: E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General, E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination, and E62 - Fiscal Policy -
Creator: Chari, V. V., Nicolini, Juan Pablo, and Teles, Pedro Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 745 Abstract: We study cooperative optimal Ramsey equilibria in the open economy addressing classic policy questions: Should restrictions be placed to free trade and capital mobility? Should capital income be taxed? Should goods be taxed based on origin or destination? What are desirable border adjustments? How can a Ramsey allocation be implemented with residence-based taxes on assets? We characterize optimal wedges and analyze alternative policy implementations.
Parola chiave: Capital income tax, Border adjustment, Value-added taxes, Origin- and destination-based taxation, Free trade, and Production efficiency Soggetto: E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General, E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination, and E62 - Fiscal Policy -
Creator: Correia, Isabel, Farhi, Emmanuel, Nicolini, Juan Pablo, and Teles, Pedro Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 698 Abstract: When the zero lower bound on nominal interest rates binds, monetary policy cannot provide appropriate stimulus. We show that, in the standard New Keynesian model, tax policy can deliver such stimulus at no cost and in a time-consistent manner. There is no need to use inefficient policies such as wasteful public spending or future commitments to low interest rates.
Parola chiave: Fiscal policy, Zero bound, Sticky prices, and Monetary policy Soggetto: E62 - Fiscal Policy, E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy, E58 - Central Banks and Their Policies, E31 - Price Level; Inflation; Deflation, E40 - Money and Interest Rates: General, and E52 - Monetary Policy -
Creator: Chari, V. V., Nicolini, Juan Pablo, and Teles, Pedro Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 581 Abstract: We use the Ramsey and Mirrlees approaches to study how fiscal and trade policy should be set cooperatively when governments must raise revenues with distorting taxes. Free trade and unrestricted capital mobility are optimal. Efficient outcomes can be implemented with taxes only on final consumption goods and labor income. We study alternative tax systems, showing that uniform taxation of household asset returns, and not taxing corporate income yields efficient outcomes. Border adjustments exempting exports from and including imports in the tax base are desirable. Destination- and residence-based tax systems are desirable compared to origin- and source-based systems.
Parola chiave: Origin- and destination-based taxation, Value-added taxes, Free trade, Production efficiency, Border adjustment, and Capital income tax Soggetto: E62 - Fiscal Policy, E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General, and E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination -
Creator: Correia, Isabel, Nicolini, Juan Pablo, and Teles, Pedro Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 403 Abstract: In this article, we analyze the implications of price-setting restrictions for the conduct of cyclical fiscal and monetary policy. We consider standard monetary economies that differ in the price-setting restrictions imposed on the firms. We show that, independently of the degree or type of price stickiness, it is possible to implement the same efficient set of allocations and that each allocation in that set is implemented with policies that are also independent of the price stickiness. In this sense, environments with different price-setting restrictions are equivalent.
Parola chiave: Sticky prices and Optimal fiscal and monetary policy Soggetto: E40 - Money and Interest Rates: General, E58 - Central Banks and Their Policies, E62 - Fiscal Policy, E31 - Price Level; Inflation; Deflation, E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy, and E52 - Monetary Policy -
Creator: Chari, V. V., Nicolini, Juan Pablo, and Teles, Pedro Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 571 Abstract: We revisit the question of how capital should be taxed. We allow for a rich set of tax instruments that consists of taxes widely used in practice, including consumption, dividend, capital, and labor income taxes. We restrict policies to respect promises that the government has made in the previous period regarding the current value of wealth. We show that capital should not be taxed if households have preferences that are standard in the macroeconomics literature. We show that Ramsey outcomes that must respect such promises are time consistent. We show that the presumption in the literature that capital should be taxed for some length of time arises because the tax system is restricted.
Parola chiave: Time consistency, Production efficiency, and Capital income taxe60 Soggetto: E62 - Fiscal Policy, E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General, and E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination