Effects of Capital Income Taxes on Welfare in an Overlapping-Generations Model

This paper describes the short-run and long-run effects of various capital income taxes on welfare using an overlapping-generations model according to the “new view”. It is in the nature of a survey, because some of the results from seminal papers in this field can be achieved, under weaker assumptions. The paper reaches the paradoxical and intriguing conclusion that the distortionary effects of a dividend tax in the long run and of capital gains tax in the short run improve economic welfare, and exceed the income effects.