Do Mobile Pensioners Threaten the Deferred Taxation of Savings?

meier, volker ; wagenery, andreas;

We investigate optimal taxation of lifetime income with and without an option to emigrate during old age. The government sets the rates of deferred taxation and of taxes on interest income. With immobile agents, the optimal policy consists of full deferral of income taxes on savings and full taxation of interest. Potential mobility of the old calls for lower degrees of deferral and reduced taxation of interest. However, full immediate taxation of savings in combination with full tax exemption on interest income can never be optimal