Discussion paper

DP14144 Optimal Taxation with Homeownership and Wealth Inequality

We consider optimal taxation in a model with wealth-poor and wealth-rich households, where wealth derives from business capital and homeownership, and investigate the consequences on these tax rates of a rising wealth inequality at steady state. 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.


Reichlin, P and N Borri (2019), ‘DP14144 Optimal Taxation with Homeownership and Wealth Inequality‘, CEPR Discussion Paper No. 14144. CEPR Press, Paris & London. https://cepr.org/publications/dp14144