Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/107342
Authors: 
Ábrahám, Árpád
Koehne, Sebastian
Pavoni, Nicola
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 5138
Abstract: 
Several frictions restrict the government's ability to tax assets. First, it is very costly to monitor trades on international asset markets. Second, agents can resort to nonobservable low-return assets such as cash, gold or foreign currencies if taxes on observable assets become too high. This paper shows that limitations in asset taxation have important consequences for the taxation of labor income. Using a dynamic moral hazard model of social insurance, we find that optimal labor income taxes become less progressive when governments face limitations in asset taxation. We evaluate the quantitative effect of imperfect asset taxation for two applications of our model.
Subjects: 
optimal income taxation
capital taxation
progressivity
JEL: 
D82
D86
E21
H21
Document Type: 
Working Paper

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