Abraham, Arpad and Koehne, Sebastian and Pavoni, Nicola (2012): Optimal income taxation with asset accumulation.
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Several frictions restrict the government's ability to tax assets. First of all, it is very costly to monitor trades on international asset markets. Moreover, agents can resort to non-observable 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 observability have important consequences for the taxation of labor income. Using a dynamic moral hazard model of social insurance, we �find that optimal labor income taxes typically become less progressive when assets are imperfectly observed. We evaluate the effect quantitatively in a model calibrated to U.S. data.
|Item Type:||MPRA Paper|
|Original Title:||Optimal income taxation with asset accumulation|
|Keywords:||Optimal Income Taxation; Capital Taxation; Asset Accumulation; Progressivity|
|Subjects:||H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth
|Depositing User:||Sebastian Koehne|
|Date Deposited:||07. May 2012 14:25|
|Last Modified:||31. Oct 2015 23:40|
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