 Wealth taxation and life expectancyAntonio Andrés Bellofatto Journal of Monetary Economics, 2025, vol. 152, issue C Abstract: This paper studies the role of wealth taxes in providing insurance against lifespan risk through the lens of a dynamic Mirrlees model with altruism. I derive novel formulas linking optimal taxes on savings and bequests to the degree of annuity market imperfections at the optimum. In the presence of positive correlation between productivity and life expectancy, optimal annuity markups are positive in expectation. This creates a motive not only for taxing savings but also for subsidizing bequests. When calibrating the model, I find that the forces of differential longevity lead to optimal wealth taxes commensurate with prevailing wealth tax rates in developed countries. Relative to the US status quo, optimal policies provide work incentives by increasing welfare of the short-lived at the bottom of the skill distribution. This channel generates significant welfare gains. Replacing the optimal annuity markup by a nonlinear history-independent approximation generates small efficiency losses. Keywords: Optimal taxation; Savings and bequests; Differential longevity; Annuities (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:152:y:2025:i:c:s0304393225000522 DOI: 10.1016/j.jmoneco.2025.103781 Access Statistics for this article Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser More articles in Journal of Monetary Economics from Elsevier |
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