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Title: Wealth Taxes and Inequality

Author(s): Nicola Borri and Pietro Reichlin

Publication Date: July 2018

Keyword(s): Housing, inequality, Wealth and Wealth Taxes

Programme Area(s): Macroeconomics and Growth and Public Economics

Abstract: We analyze the optimal combination of wealth and labor tax rates in a model where wealth-to-income ratios and wealth inequality are rising endogenously due to unbalanced technological improvement in a two-sector economy. We consider rich and poor households, financial and housing wealth, and find that a "realistic" optimal steady state tax structure includes some taxation of labor, zero taxation of financial wealth, a housing wealth tax on rich households and a housing wealth subsidy on poor households. These findings are robust with respect to variations in the housing demand elasticity.

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Bibliographic Reference

Borri, N and Reichlin, P. 2018. 'Wealth Taxes and Inequality'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13067