Discussion paper

DP13067 Wealth Taxes and Inequality

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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Citation

REICHLIN, P and N Borri (eds) (2018), “DP13067 Wealth Taxes and Inequality”, CEPR Press Discussion Paper No. 13067. https://cepr.org/publications/dp13067