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Optimal Income Taxation with Asset Accumulation

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  • Sebastian Koehne

    (IIES, Stockholm University)

  • Nicola Pavoni

    (Bocconi University)

  • Arpad Abraham

    (European University Institute)

Abstract

Several frictions might prevent (or make undesirable) the full taxation of savings. Due to international capital mobility, for instance, the government may not have perfect control over agent's saving and consumption decisions. We show in this paper that a restricted ability to tax savings has important implications for the taxation of labor income. Specifically, when agents have preferences with convex absolute risk-aversion, we find that optimal marginal tax rates on labor income become more regressive when savings cannot be fully taxed.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 1161.

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Date of creation: 2011
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Handle: RePEc:red:sed011:1161

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  1. Enrique G. Mendoza & Assaf Razin & Linda L. Tesar, 1994. "Effective Tax Rates in Macroeconomics: Cross-Country Estimates of Tax Rates on Factor Incomes and Consumption," NBER Working Papers 4864, National Bureau of Economic Research, Inc.
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  3. Mikhail Golosov & Narayana Kocherlakota & Aleh Tsyvinski, 2002. "Optimal Indirect and Capital Taxation," Levine's Working Paper Archive 391749000000000449, David K. Levine.
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  16. Eaton, Jonathan & Rosen, Harvey S, 1980. "Optimal Redistributive Taxation and Uncertainty," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 95(2), pages 357-64, September.
  17. Nicola Pavoni & Arphad Abraham, 2004. "First Order Approach for Principal-Agent Models with Hidden Borrowing and Lending: The Two Period Case," 2004 Meeting Papers, Society for Economic Dynamics 572, Society for Economic Dynamics.
  18. Sebastian Koehne & Nicola Pavoni & Arpad Abraham, 2010. "On the First-Order Approach in Principal-Agent Models with Hidden Borrowing and Lending," 2010 Meeting Papers, Society for Economic Dynamics 947, Society for Economic Dynamics.
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Cited by:
  1. Rodolfo G. Campos & Iliana Reggio, 2013. "Measurement error in imputation procedures," Banco de Espa�a Working Papers, Banco de Espa�a 1322, Banco de Espa�a.
  2. Koehne, Sebastian & Kuhn, Moritz, 2013. "Optimal capital taxation for time-nonseparable preferences," MPRA Paper 45203, University Library of Munich, Germany.
  3. Sebastian Koehne & Moritz Kuhn, 2014. "Optimal Taxation in a Habit Formation Economy," CESifo Working Paper Series 4581, CESifo Group Munich.

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