Optimal Income Taxation when Asset Taxation is Limited

Árpád Ábrahám, Sebastian Koehne, Nicola Pavoni

Research output: Contribution to journalArticle (Academic Journal)peer-review

6 Citations (Scopus)
102 Downloads (Pure)


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. We study a simple dynamic moral hazard model of social insurance with observable and nonobservable saving decisions. We find that optimal labor income taxes become less progressive when the ability to tax savings is limited.
Original languageEnglish
Pages (from-to)14
Number of pages29
JournalJournal of Public Economics
Early online date5 Mar 2016
Publication statusPublished - 1 Apr 2016

Structured keywords

  • ECON Macroeconomics


  • Optimal income taxation
  • Capital taxation
  • Progressivity


Dive into the research topics of 'Optimal Income Taxation when Asset Taxation is Limited'. Together they form a unique fingerprint.

Cite this