... tax status of assets could be of greater importance than an asset's expected performance - suggesting zero taxation will lead to greater investment, which contributes to greater economic growth. Of course, it is said capital income is taxed too heavily. But, is there evidence of high capital income tax rates being optimal? Seminal work on optimal tax code choice dates back to Ramsey (1927), where optimal levels of excise tax on consumption were characterised. The idea of maximising society welfare, subject to budget and other constraints, is the optimal taxation problem - often called the Ramsey Problem. Ramsey assumed the setting of taxes to be subject to constraints. Firstly, certain revenue should be raised. Secondly, whatever the tax system, an economy's agents react in their own interest (through assumed competitive markets) - therefore, policy should account for equilibrium reactions by firms/consumers. When considering tax policy format, economists are ...

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