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Optimal Income Taxation with Asset Accumulation

Author

Listed:
  • 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.

Suggested Citation

  • Sebastian Koehne & Nicola Pavoni & Arpad Abraham, 2011. "Optimal Income Taxation with Asset Accumulation," 2011 Meeting Papers 1161, Society for Economic Dynamics.
    • Handle: RePEc:red:sed011:1161
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    References listed on IDEAS

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    Cited by:

    1. Marek Kapicka & Julian Neira, 2015. "Optimal Taxation with Risky Human Capital," CERGE-EI Working Papers wp553, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    2. Christine Ho & Nicola Pavoni, 2016. "Efficient Child Care Subsidies," Working Papers 572, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    3. Koehne, Sebastian & Kuhn, Moritz, 2015. "Optimal taxation in a habit formation economy," Journal of Public Economics, Elsevier, vol. 122(C), pages 31-39.
    4. Koehne, Sebastian & Kuhn, Moritz, 2013. "Optimal capital taxation for time-nonseparable preferences," MPRA Paper 45203, University Library of Munich, Germany.
    5. Spencer Bastani & Sören Blomquist & Luca Micheletto, 2013. "The Welfare Gains Of Age‐Related Optimal Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 1219-1249, November.
    6. Campos, Rodolfo G. & Reggio, Iliana, 2014. "Measurement error in imputation procedures," Economics Letters, Elsevier, vol. 122(2), pages 197-202.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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