Konferenzbeitrag
On the Desirability of Taxing Capital Income to Boost Social Insurance
This paper analyzes optimal linear taxes on labor income and savings in a standard two-period life-cycle model with endogenous leisure demands in both periods and non-insurable income risks. Households are subject to skill shocks in both periods of the life-cycle. We allow for completely general skill processes including those with persistence in skill shocks. We demonstrate that capital taxes are optimal since they reduce moral hazard in social insurance in two distinct ways: i) capital taxes reduce labor supply distortions on second-period labor supply, since second-period labor supply and saving are substitutes, ii) capital taxes reduce distortions in first-period labor supply by allowing for a lower level of labor taxes, although this effect is partially off-set because first-period labor supply and saving are complements. Capital taxes will be more attractive for social insurance if a larger part of risk is realized in the first period of the life-cycle. Our results suggest that taxing (retirement) saving is optimal to boost the retirement age and to reduce the tax-burden on working-age individuals.
- Language
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Englisch
- Bibliographic citation
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Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Dynamic Aspects in Optimal Taxation ; No. F17-V2
- Classification
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Wirtschaft
Taxation and Subsidies: Efficiency; Optimal Taxation
Information, Knowledge, and Uncertainty: General
Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
- Subject
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Optimal Capital Taxation
Risk
Atkinson-Stiglitz theorem
- Event
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Geistige Schöpfung
- (who)
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Schindler, Dirk
Jacobs, Bas
- Event
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Veröffentlichung
- (who)
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Verein für Socialpolitik
- (where)
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Frankfurt a. M.
- (when)
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2010
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Konferenzbeitrag
Associated
- Schindler, Dirk
- Jacobs, Bas
- Verein für Socialpolitik
Time of origin
- 2010
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