Optimal Taxation with Homeownership and Wealth Inequality

54 Pages Posted: 4 Dec 2019

See all articles by Nicola Borri

Nicola Borri

LUISS University - Department of Economics and Finance

Pietro Reichlin

Luiss Guido Carli University - Department of Economics and Finance; Centre for Economic Policy Research (CEPR)

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Date Written: November 2019

Abstract

We consider optimal taxation in a model with wealth-poor and wealth-rich households, where wealth derives from business capital and homeownership, and investigate the consequences on these tax rates of a rising wealth inequality at steady state. The optimal tax structure includes some taxation of labor, zero taxation of financial and business capital, a housing wealth tax on the wealth-rich households and a housing subsidy on the wealth-poor households. When wealth inequality increases, the optimal balance between labor and housing wealth taxes depends on the source of the increasing wealth.

Keywords: Housing, taxation, Wealth

JEL Classification: E21, E62, G1, H2, H21

Suggested Citation

Borri, Nicola and Reichlin, Pietro, Optimal Taxation with Homeownership and Wealth Inequality (November 2019). CEPR Discussion Paper No. DP14144. Available at SSRN: https://ssrn.com/abstract=3496633

Nicola Borri (Contact Author)

LUISS University - Department of Economics and Finance ( email )

viale Romania, 32
Rome, 00197
Italy

HOME PAGE: http://docenti.luiss.it/borri/

Pietro Reichlin

Luiss Guido Carli University - Department of Economics and Finance ( email )

Viale Romania, 32
Rome, 00197
Italy
390685225554 (Phone)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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