Optimal income taxation with asset accumulation

Arpad Abraham (), Sebastian Koehne and Nicola Pavoni

MPRA Paper from University Library of Munich, Germany

Abstract: Several frictions restrict the government's ability to tax assets. First of all, it is very costly to monitor trades on international asset markets. Moreover, agents can resort to non-observable low-return assets such as cash, gold or foreign currencies if taxes on observable assets become too high. This paper shows that limitations in asset observability have important consequences for the taxation of labor income. Using a dynamic moral hazard model of social insurance, we �find that optimal labor income taxes typically become less progressive when assets are imperfectly observed. We evaluate the effect quantitatively in a model calibrated to U.S. data.

Keywords: Optimal Income Taxation; Capital Taxation; Asset Accumulation; Progressivity (search for similar items in EconPapers)
JEL-codes: D82 E21 H21 (search for similar items in EconPapers)
Date: 2012-05-03
New Economics Papers: this item is included in nep-acc, nep-dge, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Optimal Income Taxation with Asset Accumulation (2014)
Working Paper: Optimal Income Taxation with Asset Accumulation (2014)
Working Paper: Optimal Income Taxation with Asset Accumulation (2014)
Working Paper: Optimal Income Taxation with Asset Accumulation (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:38629

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