How Capital Should be Taxed

The lecture analyses the appropriate role of capital taxation in advanced economies by synthesising the research on optimal capital taxation. To highlight the redistributive role of capital taxation, robust correlations between labour income, wealth and capital income are documented and new evidence on the wealth holdings of the wealthiest is presented. Distortionary effects of capital taxation are analysed and critical issues in its practical implementation are discussed. The overall conclusion is that there are good reasons to tax capital and that Nordic "dual" income taxation could be a constructive way to strike a balance between an optimal and administratively feasible tax system.