NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Evaluating the Taxation of Risky Assets

Alan J. Auerbach

NBER Working Paper No. 806
Issued in November 1981
NBER Program(s):   PE

This paper explores the taxation of risky assets, both from the theoretical perspective of optimal taxation and from the practical one of measuring "the" tax rate on an asset when, as under existing practice, its stochastic returns are subject to differential tax treatment across states of nature. The results suggest that it may be "appropriate" for tax rates to vary systematically with the riskiness of an asset, but that use of the expected tax rate to evaluate the characteristics of any particular tax system may be very misleading.

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