Optimal Taxation of Capital Income with Heterogeneous Rates of Return

• Published in: The Economic journal (London) Vol. 135; no. 665; pp. 180 - 211
• Main Authors: Gerritsen, Aart, Jacobs, Bas, Spiritus, Kevin, Rusu, Alexandra V
• Format: Journal Article
• Language: English
• Published: 09.12.2024

We derive the Pareto-efficient mix of non-linear taxes on labour income and capital income if people differ in their rates of return on capital. We allow for two reasons why rates of return differ: because individuals with higher ability are better able to invest their capital or because wealthier i...