EconStor >
Verein für Socialpolitik >
Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/37436
  
Title:On the Desirability of Taxing Capital Income to Boost Social Insurance PDF Logo
Authors:Schindler, Dirk
Jacobs, Bas
Issue Date:2010
Series/Report no.:Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Dynamic Aspects in Optimal Taxation F17-V2
Abstract:This paper analyzes optimal linear taxes on labor income and savings in a standard two-period life-cycle model with endogenous leisure demands in both periods and non-insurable income risks. Households are subject to skill shocks in both periods of the life-cycle. We allow for completely general skill processes including those with persistence in skill shocks. We demonstrate that capital taxes are optimal since they reduce moral hazard in social insurance in two distinct ways: i) capital taxes reduce labor supply distortions on second-period labor supply, since second-period labor supply and saving are substitutes, ii) capital taxes reduce distortions in first-period labor supply by allowing for a lower level of labor taxes, although this effect is partially off-set because first-period labor supply and saving are complements. Capital taxes will be more attractive for social insurance if a larger part of risk is realized in the first period of the life-cycle. Our results suggest that taxing (retirement) saving is optimal to boost the retirement age and to reduce the tax-burden on working-age individuals.
Subjects:Optimal Capital Taxation
Risk
Atkinson-Stiglitz theorem
JEL:H21
D80
D91
Document Type:Conference Paper
Appears in Collections:Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie

Files in This Item:
File Description SizeFormat
VfS_2010_pid_307.pdf261.09 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/37436

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.