I present a model of optimal capital taxation with heterogeneous labor productivity and stochastic, potentially scale dependent, returns to savings. I examine the relevance of both capital income and wealth taxation. First, the optimal policy combines confiscatory capital income taxes with wealth transfers to perfectly insure agents against risky returns. However as soon as returns exhibit scale dependence, an access to the expected rate of return conditional on initial savings must be guaranteed at the optimum.
Second, in constrained settings where the government does not observe capital income but only initial savings, there is no capital taxation at the optimum as the logic of Atkinson-Stiglitz (1976) applies. However, in environments where the government does not observe initial savings but has only information on capital income, the optimum does feature positive capital taxation as it provides some form of insurance against risky returns. This positive capital taxation at the optimum extends to the case where the government only observes ex-post wealth, i.e the sum of savings and capital income. These results are valid under any social welfare function.