Author： Mateos-Planas Xavier
Publisher： American Economic Association
ISSN： 0002-8282
Source： The American Economic Review, Vol.100, Iss.1, 2010-03, pp. : 337-363
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Abstract
This article studies the effects of demographics on the mix of tax rates on labor and capital. It uses a quantitative general-equilibrium, overlapping-generations model where tax rates are voted without past commitments in every period and characterized as a Markov equilibrium. In the United States, the younger voting-age population in 1990 compared to 1965 accounts for the observed decline in the relative capital tax rate between those two years. A younger population raises the net return to capital, leads voters to increase their savings, and results in a preference for lower taxes on capital. Conversely, aging might increase capital taxation.
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