A progressive capital income tax — a bad idea, or just a useless idea? Lessons for Bulgaria (1999--2018)

Abstract

Progressive capital income taxation is introduced into a real-business-cycle (RBC) model with fiscal policy. The artificial economy is calibrated to Bulgarian data for the period 1999–2018. The quantitative role of progressive taxation on capital income is investigated in light of its possible stabilization role in Bulgaria over the business cycle. Unfortunately,the quantitative effect of the presence of such a tax turned out to be very small,and thus not important for either business cycle stabilization,or public finance issues.