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.
Optimal Taxation with Homeownership and Wealth Inequality / Reichlin, Pietro; Borri, Nicola. - In: REVIEW OF ECONOMIC DYNAMICS. - ISSN 1094-2025. - 40:(2021), pp. 64-84. [10.1016/j.red.2020.09.003]
Optimal Taxation with Homeownership and Wealth Inequality
PIETRO REICHLIN;Nicola Borri
2021
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.File | Dimensione | Formato | |
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