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Title:Optimal income taxation with a risky asset: the triple income tax PDF Logo
Authors:Schindler, Dirk
Issue Date:2006
Series/Report no.:CESifo working paper 1834
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
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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