Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/25879 
Authors: 
Year of Publication: 
2006
Series/Report no.: 
CESifo Working Paper No. 1834
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We show in a two-period world with endogenous savings and two assets, one of them exhibiting a stochastic return, that an interest-adjusted income tax is optimal. This tax leaves a riskless component of interest income tax free and taxes the excess return with a special tax rate. There is no trade-off between risk allocation and efficiency in intertemporal consumption. Both goals are reached. As the resulting tax system divides income into three parts, the tax can also be called a Triple Income Tax. This distinction and a special tax rate on the excess return are necessary in order to have an optimal risk-shifting effect.
JEL: 
H21
Document Type: 
Working Paper
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