US Capital Income Tax Rate Too High, Labor Income Tax Rate Too Low.
Long-term optimal tax policy in economies with different income levels and incomplete markets suggests a need for a tax on capital income. By studying a model of the U.S. economy, it was found that the current capital income tax rate is too high, while labor income tax and debt levels are too low compared to what is considered optimal. This research suggests that adjustments in tax rates and debt levels could lead to more efficient economic outcomes.