a. Why a proportional tax on wealth will not affect the fraction of wealth allocated to risky…

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a. Why a proportional tax on wealth will not affect the fraction of wealth allocated to risky assets.

b. Suppose that only the returns from the safe asset were subject to a proportional income tax. How would this affect the fraction of wealth held in risky assets? Which investors would be most affected by such a tax?

c. How would your answer to part (b) change if all asset returns were subject to a proportional income tax?

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