Rethinking capital and wealth taxation

From Thomas Piketty and Emmanuel Saez:

This paper reviews recent developments in the theory of optimal capital taxation. We emphasize three main rationales for capital taxation. First, the frontier between capital and labor income flows is often fuzzy, thereby lending support to a broad-based, comprehensive income tax. Next, the very notions of income and consumption flows are difficult to define and measure for top wealth holders. Therefore the proper way to tax billionnaires is a progressive wealth tax. Finally, there are strong meritocratic reasons why we should tax inherited wealth more than earned income or self-made wealth (for which individuals can be held responsible, at least in part). This implies that the ideal fiscal system should also entail a progressive inheritance tax, in addition to progressive income and wealth taxes. We then confront our prescriptions with historical experience. Although there are significant differences, we argue that observed fiscal systems in modern democracies bear important similarities with this ideal tryptic.

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About ozidar

Graduate student at UC Berkeley, studying public finance & labor economics. https://sites.google.com/site/omzidar/
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One Response to Rethinking capital and wealth taxation

  1. Nathanael says:

    Wow. Piketty & Saez continue to do the only important work in economics today.

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