On the optimal taxation of capital income

Larry E. Jones, Rodolfo E. Manuelli, Peter E. Rossi

Research output: Contribution to journalArticlepeer-review

139 Scopus citations


We show that in models in which labor services are supplied jointly with human capital, the Chamley and Judd result on zero capital income taxation in the limit extends to labor taxes as long as accumulation technologies are constant returns to scale. Moreover, for a class of widely used preferences, consumption taxes are zero in the limit as well. However, we show by the construction of two examples that these results no longer hold for certains types of restrictions on tax rates or if there are profits generated.Journal of Economic LiteratureClassification Numbers: E62, H21.

Original languageEnglish (US)
Pages (from-to)93-117
Number of pages25
JournalJournal of Economic Theory
Issue number1
StatePublished - Mar 1997

Bibliographical note

Funding Information:
* We thank V. V. Chari, Ken Judd, Nick Bull, seminar participants at several places, two referees of this journal, and an associate editor for their comments and the National Science Foundation for financial support. Remaining errors are ours, of course.


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