Abstract
Progressive income taxation may favor, or hinder, risky investments. The effects of any progressive tax on risk-taking, can only be described if the investor's utility function is known up to a positive linear transformation. The effects of proportional income taxation cannot be predicted unambiguously, if there are differences between taxable income and economic income. Neither the statement that progressive taxation decreases the demand for risky assets nor the call for a lower tax rate on capital gains to stimulate investment and risk-taking seem to be justified.
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