Results 1  10
of
218
Dynamic Optimal Taxation with Private Information
 REVIEW OF ECONOMIC STUDIES
, 2005
"... We study dynamic optimal taxation in a class of economies with private information. Constrained optimal allocations in these environments are complicated and historydependent. Yet, we show that they can be implemented as competitive equilibria in market economies supplemented with simple tax system ..."
Abstract

Cited by 57 (3 self)
 Add to MetaCart
We study dynamic optimal taxation in a class of economies with private information. Constrained optimal allocations in these environments are complicated and historydependent. Yet, we show that they can be implemented as competitive equilibria in market economies supplemented with simple tax systems. The market structure in these economies is similar to that in Bewley (1986): agents supply labor and trade riskfree claims to future consumption, subject to a budget constraint and a debt limit. Optimal taxes are conditioned only on two observable characteristics an agent’s accumulated stock of claims, or wealth, and her current labour income and they are not additively separable in these variables. The marginal wealth tax is decreasing in labour income and its expected value is generally positive. The marginal labour income tax is decreasing in wealth.
Zero Expected Wealth Taxes: A Mirrlees Approach to Dynamic Optimal Taxation
 Econometrica
, 2005
"... In this paper, I consider a dynamic economy in which a government needs to finance a stochastic process of purchases. The agents in the economy are privately informed about their skills, which evolve stochastically over time; I impose no restriction on the stochastic evolution of skills. I construct ..."
Abstract

Cited by 53 (6 self)
 Add to MetaCart
In this paper, I consider a dynamic economy in which a government needs to finance a stochastic process of purchases. The agents in the economy are privately informed about their skills, which evolve stochastically over time; I impose no restriction on the stochastic evolution of skills. I construct a tax system that implements a symmetric constrained Pareto optimal allocation. The tax system is constrained to be linear in an agent’s wealth, but can be arbitrarily nonlinear in his current and past labor incomes. I find that wealth taxes in a given period depend on the individual’s labor income in that period and previous ones. However, in any period, the expectation of an agent’s wealth tax rate in the following period is zero. As well, the government never collects any net revenue from wealth taxes.
PoliticoEconomic Equilibrium And Economic Growth
, 1994
"... this paper is that as the role for policy increases, it becomes all the more important to study how the policies themselves are determined in the economies under study. Put differently, in order to understand the uneven growth records around the world and over time, it is perhaps insufficient to sho ..."
Abstract

Cited by 50 (7 self)
 Add to MetaCart
this paper is that as the role for policy increases, it becomes all the more important to study how the policies themselves are determined in the economies under study. Put differently, in order to understand the uneven growth records around the world and over time, it is perhaps insufficient to show that differences in policies are likely causes, because this only begs the followup question: "Why, then, are the lowgrowth policies chosen?".
Optimal Taxation in LifeCycle Economies
 JOURNAL OF ECONOMIC THEORY
, 1998
"... This paper studies optimal taxation in an overlapping generations economy. We characterize the optimal path of fiscal policy, both in the long run and in the transition to the steady state. The implications of this study are in sharp contrast with the prescription offered by infinitelylived agent m ..."
Abstract

Cited by 38 (3 self)
 Add to MetaCart
This paper studies optimal taxation in an overlapping generations economy. We characterize the optimal path of fiscal policy, both in the long run and in the transition to the steady state. The implications of this study are in sharp contrast with the prescription offered by infinitelylived agent models. First, the government's desire to tax initial holdings of capital at confiscatory rates is endogenously curtailed by intergenerational redistributional considerations. Second, because of lifecycle elements, capital income taxes are in general different from zero even in the steady state. The tax rate on capital income should only be zero if it is optimal to tax consumption goods uniformly over the lifetime of individuals. The conditions for uniform taxation of consumption depend, in turn, on preferences, the agepro le of labor productivity, and the set of taxes available to the government.
Intermediate Goods and Weak Links: A Theory of Economic Development
, 2007
"... Per capita income in the richest countries of the world exceeds that in the poorest countries by more than a factor of 50. What explains these enormous differences? This paper returns to two old ideas in development economics and proposes that complementarity and linkages are at the heart of the exp ..."
Abstract

Cited by 28 (1 self)
 Add to MetaCart
Per capita income in the richest countries of the world exceeds that in the poorest countries by more than a factor of 50. What explains these enormous differences? This paper returns to two old ideas in development economics and proposes that complementarity and linkages are at the heart of the explanation. First, just as a chain is only as strong as its weakest link, problems at any point in a production chain can reduce output substantially if inputs enter production in a complementary fashion. Second, linkages between firms through intermediate goods deliver a multiplier similar to the one associated with capital accumulation in a neoclassical growth model. Because the intermediate goods ’ share of revenue is about 1/2, this multiplier is substantial. The paper builds a model with complementary inputs and links across sectors and shows that it can easily generate 50fold aggregate income differences.
On the Optimal Progressivity of the Income Tax Code
, 2005
"... This paper computes the optimal progressivity of the income tax code in a dynamic general equilibrium model with household heterogeneity in which uninsurable labor productivity risk gives rise to a nontrivial income and wealth distribution. A progressive tax system serves as a partial substitute for ..."
Abstract

Cited by 26 (3 self)
 Add to MetaCart
This paper computes the optimal progressivity of the income tax code in a dynamic general equilibrium model with household heterogeneity in which uninsurable labor productivity risk gives rise to a nontrivial income and wealth distribution. A progressive tax system serves as a partial substitute for missing insurance markets and enhances an equal distribution of economic welfare. These beneficial effects of a progressive tax system have to be traded off against the efficiency loss arising from distorting endogenous labor supply and capital accumulation decisions. Using a utilitarian steady state social welfare criterion we find that the optimal US income tax is well approximated by a flat tax rate of 17.2 % and a fixed deduction of about $9,400: The steady state welfare gains from a fundamental tax reform towards this tax system are equivalent to 1.7 % higher consumption in each state of the world. An explicit computation of the transition path induced by a reform of the current towards the optimal tax system indicates that a majority of the population currently
On the Size of U.S. Government: Political Economy in the Neoclassical Growth Model
, 1999
"... We study a dynamic version of Meltzer and Richard’s medianvoter model of the size of government. Taxes are proportional to total income, and they are redistributed as equal lumpsum transfers. Voting takes place periodically over time, and each consumer votes for the tax rate that maximizes his equ ..."
Abstract

Cited by 23 (4 self)
 Add to MetaCart
We study a dynamic version of Meltzer and Richard’s medianvoter model of the size of government. Taxes are proportional to total income, and they are redistributed as equal lumpsum transfers. Voting takes place periodically over time, and each consumer votes for the tax rate that maximizes his equilibrium utility. We calibrate the model to match U.S. data. Key elements in the calibration are the income and wealth distribution and the parameters governing the laborleisure and consumptionsavings choices. The total size of transfers predicted by our politicaleconomy model is quite close to the size of transfers in the data.
2011): “The Case for a Progressive Tax: From Basic Research to Policy Recommendations
 Journal of Economic Perspectives
"... An electronic version of the paper may be downloaded • from the SSRN website: www.SSRN.com • from the RePEc website: www.RePEc.org • from the CESifo website: Twww.CESifogroup.org/wpT CESifo Working Paper No. 3548 The Case for a Progressive Tax: From Basic Research to Policy Recommendations This pap ..."
Abstract

Cited by 19 (3 self)
 Add to MetaCart
An electronic version of the paper may be downloaded • from the SSRN website: www.SSRN.com • from the RePEc website: www.RePEc.org • from the CESifo website: Twww.CESifogroup.org/wpT CESifo Working Paper No. 3548 The Case for a Progressive Tax: From Basic Research to Policy Recommendations This paper presents the case for tax progressivity based on recent results in optimal tax theory. We consider the optimal progressivity of earnings taxation and whether capital income should be taxed. We critically discuss the academic research on these topics and when and how the results can be used for policy recommendations. We argue that a result from basic research is relevant for policy only if (a) it is based on economic mechanisms that are empirically relevant and first order to the problem, (b) it is reasonably robust to changes in the modeling assumptions, (c) the policy prescription is implementable (i.e., is socially acceptable and is not too complex). We obtain three policy recommendations from basic research that satisfy these criteria reasonably well. First, very high earners should be subject to high and rising marginal tax rates on earnings. Second, low income families should be encouraged to work with earnings subsidies, which should then be phasedout with high implicit marginal tax rates. Third, capital income should be taxed. We explain why the famous zero marginal tax rate result for the top earner in the Mirrlees model and the zero capital income tax rate results of ChamleyJudd and AtkinsonStiglitz are not policy relevant in our view. JELCode: H210.
Taxing Capital? Not a Bad Idea After All
 American Economic Review
"... We quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic, uninsurable income shocks and permanent productivity differences of households. The optimal capital income tax rate is significantly positive at 36 percent. The optimal pro ..."
Abstract

Cited by 17 (6 self)
 Add to MetaCart
We quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic, uninsurable income shocks and permanent productivity differences of households. The optimal capital income tax rate is significantly positive at 36 percent. The optimal progressive labor income tax is, roughly, a flat tax of 23 percent with a deduction of $7,200 (relative to average household income of $42,000). The high optimal capital income tax is mainly driven by the life cycle structure of the model whereas the optimal progressivity of the labor income tax is attributable to the insurance and redistribution role of the tax system.