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Wealth Taxes and Inequality

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  • Reichlin, Pietro
  • Borri, Nicola

Abstract

We analyze the optimal combination of wealth and labor tax rates in a model where wealth-to-income ratios and wealth inequality are rising endogenously due to unbalanced technological improvement in a two-sector economy. We consider rich and poor households, financial and housing wealth, and find that a †realistic†optimal steady state tax structure includes some taxation of labor, zero taxation of financial wealth, a housing wealth tax on rich households and a housing wealth subsidy on poor households. These findings are robust with respect to variations in the housing demand elasticity.

Suggested Citation

  • Reichlin, Pietro & Borri, Nicola, 2018. "Wealth Taxes and Inequality," CEPR Discussion Papers 13067, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13067
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    Cited by:

    1. Nicola Borri & Pietro Reichlin, 2021. "Optimal Taxation with Home Ownership and Wealth Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 40, pages 64-84, April.
    2. Nicola Borri & Pietro Reichlin, 2021. "Optimal Taxation with Home Ownership and Wealth Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 40, pages 64-84, April.

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    More about this item

    Keywords

    Wealth; Inequality; Wealth taxes; Housing;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • G1 - Financial Economics - - General Financial Markets

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