It is also economically efficient to tax actual capital income. A dual system in which capital income is taxed less than labor income is a desirable option. In addition to capital income taxes, property taxes and inheritance taxes are little economically disruptive. Finally, it does not seem desirable to increase corporate tax strongly: it is economically disruptive and leads to a less attractive business climate for companies. However, it would be desirable to combat tax avoidance by means of more international cooperation. You can choose track my tax refund and have the best deal now.
This includes capital transaction taxes
In particular, the OECD publication Tax and economic growth (2008) provides a detailed and well-informed representation of the available literature on the influence of individual taxes on economic growth and employment. We will therefore refer to this several times.
- The tax wedge is defined here as the difference between the total labor costs for employers and the net income of employees divided by the total labor costs.
- Tax progressiveness is defined here as the difference between the marginal and the average income tax divided by one minus the average income tax. The higher the number, the higher the progressivity.
- We do not discuss excise duties here. This tax is exceptional in that the disturbed behavior it causes (for example, less consumption of alcohol and cigarettes) is a deliberate political goal.
We limit ourselves here to VAT, by far the most important consumer tax
New Zealand, which introduced a uniform rate with virtually no exemptions in 1986, shows with a VAT income ratio of around 1 that such VAT is also possible in practice.
The VAT income ratio is the ratio between the amount of VAT that the government collects and the amount of tax that it could collect if all consumption were taxed the same. Although the results should be interpreted with some caution as a low ratio can be due to many factors, it gives a good global picture of how many exceptions there are in the different national tax systems.
Including capital transaction taxes
Households would have infinite time horizons or they would form dynasties of altruistic generations perfectly linked through legacies. In addition, labor, capital and insurance markets would work perfectly. These assumptions do not appear to hold up in reality.
This discussion occurs, for example, with director of major shareholders (DGAs), who derive their income partly from capital and partly from labor.
Namely: Interest, dividends, capital growth (for example when selling shares), rental income and royalties. The capital income for the owner-occupied home is estimated on the basis of an imputed rent. For example, a fixed return of 5% of the home value on which capital income tax is subsequently levied.