Abstract
The paper deals with the theoretical and practical aspects of the taxation of labor and capital in the Czech Republic. The authors show that if the low flexibility of Czech labor is taken into account, progressive taxation could stimulate a higher supply of labor than would a linear tax.
The paper then surveys arguments for and against capital tax and builds a tax incidence model inspired by the Harberger model. The authors demonstrate the theoretical possibilities of tax incidence and apply this to the Czech taxation system.
The Czech system seems to tax capital more proportionally than labor, which, as the authors argue, reduces long-term capital accumulation by around 20 %: a substantial loss. The authors thus argue that an alternative tax system might stimulate higher economic growth.