We investigate the optimal taxation on capital and labor in a neoclassical growth model with uninsured idiosyncratic shocks to human capital. We show that uninsurable idiosyncratic income risk does not necessarily invalidate the zero-capital-tax rate result from Judd (1985) and Chamley (1986), which contrasts the existing view in the literature. More generally, whether capital income should be taxed depends on the government's debt position: capital tax should be positive given that government owes debt. However, if government debt and capital income tax are jointly chosen in optimal, then a negative capital income tax is found when taking the model to the U.S. economy. 

This paper develops a dynamic contracting model of relationship banking to study how Fintech innovations affect the creation and dissemination of borrower-specic soft information. We treat soft information as a relation-specific intangible asset that enhances firm productivity but is costly for banks to generate. Because information may leak to outside banks, insider banks cannot fully appropriate returns from monitoring, which slows information accumulation and distorts lending relationships. Embedding this mechanism into a macro framework, we show how advances in information processing and sharing reshape bank competition, lending rates, and aggregate outcomes.