This paper characterises optimal taxation when rates of return are affected by effort, ability, and financial advice. When the government observes wealth and capital income, the optimal marginal tax rate on capital income is positive, whereas the rate on wealth is negative in the baseline model....

This paper characterises optimal taxation when rates of return are affected by effort, ability, and financial advice. When the government observes wealth and capital income, the optimal marginal tax rate on capital income is positive, whereas the rate on wealth is negative in the baseline model....