capital levy


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capital levy,

form of taxation by which the government takes part of the capital of any person or business, as distinguished from a tax on personal or business income. It is usually applied to all capital above a certain minimum and may be set aside for a specific purpose, such as the reduction of the public debt. It was used by several European nations experiencing financial difficulties after World War I, and has been advocated as a measure of social welfare and a deterrent to war profits. Opponents of the capital levy stress its implied penalty on saving. In World War II, Great Britain and the United States resorted to extremely high rates of direct taxation in order to accomplish many of the aims of the capital levy.
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Although Chamley's single initial capital levy allows for first-best allocations to be achieved, such a taxation scheme has evidently little to do with the kinds of policies one observes in practice.
The capital levy is imposed by a deliberate short-run burst of money creation.
No need to dwell on issuing general obligation bonds or asking voters to approve a capital levy.
The sharp deterioration of the public finances in many countries has revived interest in a capital levy, a one-off tax on private wealth, as an exceptional measure to restore debt sustainability.
Another option floated by the city is asking voters to approve a capital levy of up to 10 years to cover public improvements related to a hospital development.
It is, in fact, a flat capital levy, without exemptions, in which the poor man pays as high a percentage as the rich man.
The district maintains some operational financial flexibility with capital levy fund reserves that can be used if needed.