Taxes on capital accumulation and economic growth

This paper investigates the effect of taxation on capital accumulation using an endogenous growth model with an altruistic bequest motive. When bequests are not operative, an increased tax on human capital may not reduce the rate of economic growth, while a tax increase on physical capital will reduce the growth rate. If bequests are operative, a tax on life-cycle capital will not affect the growth rate, while a tau increase on transfer capital will reduce the growth rate. This paper also examines how to attain the first best solution given its operative assumptions.