TY  - JOUR
AU  - Jakobsen, Katrine
AU  - Jakobsen, Kristian
AU  - Kleven, Henrik
AU  - Zucman, Gabriel
TI  - Wealth Taxation and Wealth Accumulation: Theory and Evidence from Denmark
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 24371
PY  - 2018
Y2  - March 2018
DO  - 10.3386/w24371
UR  - http://www.nber.org/papers/w24371
L1  - http://www.nber.org/papers/w24371.pdf
N1  - Author contact info:
Katrine Jakobsen
Department of Economics
University of Copenhagen
DK-1353 Copenhagen
E-Mail: k.m.jakobsen@econ.ku.dk

Kristian Jakobsen
DEA
Fiolstraede 44
DK-1171 Copenhagen
E-Mail: ktj@dea.nu

Henrik Kleven
Department of Economics
Princeton University
238 Julis Romo Rabinowitz Building
Princeton, NJ 08544
Tel: 609/986-6890
E-Mail: kleven@princeton.edu

Gabriel Zucman
Department of Economics
University of California, Berkeley
530 Evans Hall, #3880
Berkeley, CA 94720
E-Mail: zucman@berkeley.edu
AB  - Using administrative wealth records from Denmark, we study the effects of wealth taxes on wealth accumulation. Denmark used to impose one of the world’s highest marginal tax rates on wealth, but this tax was drastically reduced and ultimately abolished between 1989 and 1997. Due to the specific design of the wealth tax, these changes provide a compelling quasi-experiment for understanding behavioral responses among the wealthiest segments of the population. We find clear reduced-form effects of wealth taxes in the short and medium run, with larger effects on the very wealthy than on the moderately wealthy. We develop a simple lifecycle model with utility of residual wealth (bequests) allowing us to interpret the evidence in terms of structural primitives. We calibrate the model to the quasi-experimental moments and simulate the model forward to estimate the long-run effect of wealth taxes on wealth accumulation. Our simulations show that the long-run elasticity of wealth with respect to the net-of-tax return is sizeable at the top of distribution. Our paper provides the type of evidence needed to assess optimal capital taxation.
ER  -