Optimal Taxation with Home Ownership and Wealth Inequality

Nicola Borri and Pietro Reichlin

Review of Economic Dynamics, 2021, vol. 40, 64-84

Abstract: We consider optimal taxation in a model with wealth-poor and wealth-rich households, where wealth derives from business capital and home ownership, and investigate the consequences of a rising wealth inequality at steady state on these tax rates. 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. (Copyright: Elsevier)

Keywords: Housing wealth; Wealth inequality; Optimal taxation (search for similar items in EconPapers)
JEL-codes: E21 E62 G1 H2 H21 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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DOI: 10.1016/j.red.2020.09.003

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