Kenneth L. Judd's 1982 paper "Redistributive Taxation in a Simple Perfect Foresight Model" examines the effects of capital income taxation in a dynamic general equilibrium model. The paper investigates how capital taxation can be used for redistribution and how the effectiveness of such taxation depends on various factors, including the time preference rates of individuals, the elasticity of substitution between capital and labor, and the political process. The paper finds that unexpected capital income taxes are limited in their redistributive effectiveness because they reduce wages. If all individuals have the same time preference rate in the long run, any convergent optimal redistributive capital tax will converge to zero, regardless of factor supply elasticities. Additionally, if worker-dominated legislatures control only short-term tax rates, the equilibrium of the resulting game among the legislatures will generally result in substantial long-run taxation. These results hold regardless of whether workers hold capital. The paper also explores the implications of different tax policies and the role of political processes in determining tax rates. It shows that the optimal redistributive tax for workers is asymptotically zero if both workers and capitalists have the same time preference rate in the steady state. The paper also discusses the impact of tax changes on workers' utility, showing that short-term tax increases may be desirable, but long-term tax increases may not be, depending on the parameters of the model. The paper concludes that redistribution through capital income taxation is effective only if it is unanticipated and will persist only if workers cannot commit themselves to low taxation in the long run. The results also contradict the usual intuition that some redistribution is effective even in the long run if factor supply is not perfectly elastic. The paper highlights the importance of considering the dynamic aspects of tax policy and the role of political processes in determining tax rates.Kenneth L. Judd's 1982 paper "Redistributive Taxation in a Simple Perfect Foresight Model" examines the effects of capital income taxation in a dynamic general equilibrium model. The paper investigates how capital taxation can be used for redistribution and how the effectiveness of such taxation depends on various factors, including the time preference rates of individuals, the elasticity of substitution between capital and labor, and the political process. The paper finds that unexpected capital income taxes are limited in their redistributive effectiveness because they reduce wages. If all individuals have the same time preference rate in the long run, any convergent optimal redistributive capital tax will converge to zero, regardless of factor supply elasticities. Additionally, if worker-dominated legislatures control only short-term tax rates, the equilibrium of the resulting game among the legislatures will generally result in substantial long-run taxation. These results hold regardless of whether workers hold capital. The paper also explores the implications of different tax policies and the role of political processes in determining tax rates. It shows that the optimal redistributive tax for workers is asymptotically zero if both workers and capitalists have the same time preference rate in the steady state. The paper also discusses the impact of tax changes on workers' utility, showing that short-term tax increases may be desirable, but long-term tax increases may not be, depending on the parameters of the model. The paper concludes that redistribution through capital income taxation is effective only if it is unanticipated and will persist only if workers cannot commit themselves to low taxation in the long run. The results also contradict the usual intuition that some redistribution is effective even in the long run if factor supply is not perfectly elastic. The paper highlights the importance of considering the dynamic aspects of tax policy and the role of political processes in determining tax rates.