Higher capital tax rates reduce inequality and boost middle-income consumption.
The article explores how different types of households save money and how public investment affects inequality. By taxing capital, the government can fund public projects that benefit everyone. The study shows that higher capital taxes can reduce inequality, with even low rates being beneficial. Interestingly, middle-income households benefit the most from higher taxes, as their consumption is highest at those rates. This means that increasing capital taxes can help make society more equal without sacrificing efficiency.