Wealth Taxes and Inequality
40 Pages Posted: 31 Jul 2018
Date Written: July 2018
We analyze the optimal combination of wealth and labor tax rates in a model where wealth-to-income ratios and wealth inequality are rising endogenously due to unbalanced technological improvement in a two-sector economy. We consider rich and poor households, financial and housing wealth, and find that a "realistic" optimal steady state tax structure includes some taxation of labor, zero taxation of financial wealth, a housing wealth tax on rich households and a housing wealth subsidy on poor households. These findings are robust with respect to variations in the housing demand elasticity.
Keywords: Housing, inequality, Wealth, Wealth Taxes
JEL Classification: E21, E62, G1, H2, H21
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