Working Paper
What does the capital income tax distort?
Gokhale, Jagadeesh; Cai, Jinyong (1990)
In addition to taxing future consumption (including leisure), capital income taxation subsidizes the consumption of durables. the taxation of future consumption may be characterized as an intertemporal distortion, while the subsidy to durables may be characterized as a static distortion. the magnitude of this intertemporal distortion has received considerable attention, but few analyses have dealt with the static distortion. ; This paper decomposes the excess burden arising from capital income taxation into its static and intertemporal components. the analysis is based on a life-cycle model ...
Working Papers (Old Series) , Paper 9013

Journal Article
The welfare loss from a capital income tax
Gokhale, Jagadeesh; Cai, Jinyong (1997-01)
A decomposition of the welfare loss from a capital income tax into its two components: the intertemporal (consuming today versus tomorrow) and the within-period or static (consuming durable versus nondurable goods). Its calculations, which use a calibrated life-cycle model with a representative consumer, suggest that ignoring the static distortion may lead to substantial underestimation of the total welfare loss.
Economic Review , Issue Q I , Pages 2-10