Abstract
Several recent papers on dynamically optimal taxation have derived indeterminacy results regarding state-contingent capital taxation in stochastic equilibrium models with state-contingent government debt. I show that these results rely crucially on the assumption that there is a single, aggregate decision about private capital investment. In a model with many technologies and many capital goods, the need to preserve individual investment incentives imposes as many constraints on government policy as they are intertemporal investment decisions. The structure of capital tax rates and the structure of government debt are both restricted in many dimensions.
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