A recent literature suggests imposing different tax rates on different types of taxpayers. The rationale behind this approach is based on two conditions: (i) The characteristics of the considered types of taxpayers have to be observable and immutable to a sufficient degree. (ii) The different types have to vary in their responsiveness to taxes such that the government can exploit the differential in the efficiency costs of taxation, or the welfare weights of the types differ to make redistribution across groups desirable. In this project, we derive a model in which the government taxes different sources of income on separate schedules and simulate it for the case of Germany.  In light of the premises of tagging, this attempt seems to be promising. First, the source of income is easy to observe for the government. In fact in most actual tax systems taxpayers have to assign the reported income to different categories when filing taxes such as wage income or capital gains.2 Sec-ond, it is a well-documented observation that the responsiveness of reported income to tax-ation differs sizably across different types of income. In particular self-employed workers have a higher elasticity with respect to the net-of-tax rate than wage earners (Saez 2010; Kleven and Schultz 2013), indicating that the efficiency costs of taxation are higher in the first group. Third, the distribution of different income sources varies along the level of taxa-ble income. While at the bottom of the income distribution wage income is the predominant income source, income from self-employment gains importance at a higher level of taxable income.