January 2007

IZA DP No. 2559: Rent Taxation in a Small Open Economy: The Effect on Transitional Generations

published in: International Tax and Public Finance, 2009, 16 (5), 697-709

We show that taxation of rents may yield an intergenerational Pareto-improvement in a small open economy provided tax revenues are earmarked to reduce wage taxes. Previous literature has shown that rent taxation benefits current young and future generations, while we show that it also benefits the current old generation when the initially prevailing tax mix is sufficiently skewed towards wage taxation.