The taxation of life annuities under adverse selection
AbstractThis paper studies how annuities should be taxed in a Mirrlees-type model in the presence of adverse selection and a positive link between income and longevity. The government is able to address the adverse selection problem by implementing a progressive marginal tax rate on annuities. This amounts to subsidizing small annuities (purchased by low incomes) and taxing large annuities (purchased by high incomes). Numerical simulations suggest that the taxation is significant and becomes more pronounced as annuitants get older.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Public Economics.
Volume (Year): 94 (2010)
Issue (Month): 1-2 (February)
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Web page: http://www.elsevier.com/locate/inca/505578
Optimal taxation Asymmetric information Life cycle models and saving;
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