"Optimal Taxation of Undistributed Profits (with Etienne Lehmann)"

Abstracts : We study the optimal combination of corporate and dividend taxes when retained earnings can be used to avoid taxation. We show that eliminating dividend taxes while raising the corporate income tax can increase total revenue without affecting investment. Our simulations indicate revenue gains of 0.1–0.5\% of GDP. In an infinite-horizon model, the optimal policy sets dividend taxes to zero in every period. This result holds regardless of the welfare weights assigned to capitalists and workers.