The optimal treatment of a tax on a stock of wealth depends ____.

Question

Quizplus · Accepted Answer

The optimal treatment of a tax on a stock of wealth depends on how the flow of income from that wealth is taxed. This is because the taxation of the flow of income can affect the incentives for people to accumulate wealth, which in turn affects the size and composition of the stock of wealth subject to taxation. Therefore, the optimal treatment of a tax on a stock of wealth should be considered in the context of the taxation of the flow of income.

The Optimal Treatment of a Tax on a Stock of Wealth