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Optimal Taxation with Homeownership and Wealth Inequality

Pietro Reichlin and Nicola Borri

No 14144, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We consider optimal taxation in a model with wealth-poor and wealth-rich households, where wealth derives from business capital and homeownership, and investigate the consequences on these tax rates of a rising wealth inequality at steady state. The optimal tax structure includes some taxation of labor, zero taxation of financial and business capital, a housing wealth tax on the wealth-rich households and a housing subsidy on the wealth-poor households. When wealth inequality increases, the optimal balance between labor and housing wealth taxes depends on the source of the increasing wealth.

Keywords: Taxation; Housing; Wealth (search for similar items in EconPapers)
JEL-codes: E21 E62 G1 H2 H21 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-acc, nep-dge, nep-mac, nep-pbe and nep-ure
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