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

Progressive capital 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 for the stabilization of cyclical fluctuations in Bulgaria. 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.