An equilibrium-conserving taxation scheme for income from capital
Theory of Quantum and Complex Systems, Universiteit Antwerpen,
a e-mail: firstname.lastname@example.org
Received in final form: 23 November 2017
Published online: 14 February 2018
Under conditions of market equilibrium, the distribution of capital income follows a Pareto power law, with an exponent that characterizes the given equilibrium. Here, a simple taxation scheme is proposed such that the post-tax capital income distribution remains an equilibrium distribution, albeit with a different exponent. This taxation scheme is shown to be progressive, and its parameters can be simply derived from (i) the total amount of tax that will be levied, (ii) the threshold selected above which capital income will be taxed and (iii) the total amount of capital income. The latter can be obtained either by using Piketty’s estimates of the capital/labor income ratio or by fitting the initial Pareto exponent. Both ways moreover provide a check on the amount of declared income from capital.
Key words: Statistical and Nonlinear Physics
© The Author(s) 2018. This article is published with open access at Springerlink.com
This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.