The Dual Role of Money and Optimal Financial Taxes

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Abstract

This paper reconsiders the optimal taxation of money and other financial assets.The optimal tax formulae reflect that money provides liquidity services and is a saving vehicle.In fact, it is useful to reformulate the optimal tax problem to allow for separate taxes on the liquidity and saving functions of money.This reformulation allows one to better understand the original optimal tax problem.The possible optimality of a subsidy on borrowing, for instance, can be explained if it is noted that the theoretically correct measure of savings reflects that money as well as nonmonetary assets can serve as saving vehicles.
Original languageEnglish
Place of PublicationTilburg
PublisherMacroeconomics
Number of pages15
Volume1996-99
Publication statusPublished - 1996

Publication series

NameCentER Discussion Paper
Volume1996-99

Keywords

  • money
  • savings
  • taxation

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