Optimal income taxation when asset taxation is limited
Journal of public economics, 2016, Vol. 136, pp.14-29
ABRAHAM, Arpad, KOEHNE, Sebastian, PAVONI, Nicola, Optimal income taxation when asset taxation is limited, Journal of public economics, 2016, Vol. 136, pp.14-29 - https://hdl.handle.net/1814/61496
Retrieved from Cadmus, EUI Research Repository
Several frictions restrict the government's ability to tax assets. First, it is very costly to monitor trades on international asset markets. Second, agents can resort to nonobservable low-return assets such as cash, gold or foreign currencies if taxes on observable assets become too high. This paper shows that limitations in asset taxation have important consequences for the taxation of labor income. We study a simple dynamic moral hazard model of social insurance with observable and nonobservable saving decisions. We find that optimal labor income taxes become less progressive when the ability to tax savings is limited. (C) 2016 Elsevier B.V. All rights reserved.
Cadmus permanent link: https://hdl.handle.net/1814/61496
Full-text via DOI: 10.1016/j.jpubeco.2016.02.003
Keyword(s): Optimal income taxation Capital taxation Progressivity Moral Hazard Redistributive Taxation Social Insurance Risk-Aversion Life-Cycle Tax Rates Wealth Consumption Retirement Model
Sponsorship and Funder information:Knut och Alice Wallenbergs Stiftelse [2012.0315]MIUR (Prin) [2010NE9L9Z-004]
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