Essays on capital income taxation and fiscal adjustment.

This dissertation is a theoretical and empirical examination of important issues in macro-public finance. I focus on the optimal capital income taxation under several situations different from the Chamley-Judd set up and fiscal adjustment in EU countries following a balance sheet approach. Chapter II presents that in an economy in which entrepreneurs, who own their businesses, can shift their income between different tax bases in order to lower their tax burden, the Chamley-Judd zero capital income taxation no longer holds. Government should impose positive taxes on capital income in order to reduce the excess burden of income shifting caused by the difference between the income tax rates, even in the steady state. Qualitatively, the elasticity of income shifting and the elasticity of substitution of the production technology are critical to determine the optimal tax rates on capital income in the steady state. Numerical computation demonstrates that the optimal capital income tax rate is substantially different from zero. Welfare improvements switching from the Chamley-Judd type policy to the optimal factor income taxation or consumption based taxes are also quantitatively examined. Chapter III quantitatively and qualitatively examines the optimal income tax policies with land in the steady state. The derived formula shows that the optimal capital income tax rate depends on the marginal distortion of capital income taxation, the share of after-tax land rents, and the elasticity of substitution of the production technology. However, numerical computation suggests that although the optimal capital income tax rate in the steady state is qualitatively different from zero, it is very close to zero. The zero capital income taxation can still be a goal of tax reforms in the long run. Chapter IV, given the fact that several European Union (EU) countries have recently implemented or are envisaging fiscal operations which improve budgetary figures but have no structural impact on government finances, evaluates some of these measures using a balance sheet approach, especially, the degree to which reductions in government debt in EU countries has been accompanied by a decumulation of government assets. In the run-up to Maastricht, there is a strong correlation between changes in government liabilities and government assets and larger declines in government assets in countries from higher public debt levels.Ph.D.Economic theoryFinanceSocial SciencesUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/124514/2/3150047.pd