Arbeitspapier

Nonlinear Tax Incidence and Optimal Taxation in General Equilibrium

We study the incidence and the optimal design of nonlinear income taxes in a Mirrleesian economy with a continuum of endogenous wages. We characterize analytically the incidence of any tax reform by showing that one can mathematically formalize this problem as an integral equation. For a CES production function, we show theoretically and numerically that the general equilibrium forces raise the revenue gains from increasing the progressivity of the U.S. tax schedule. This result is reinforced in the case of a Translog technology where closer skill types are stronger substitutes. We then characterize the optimum tax schedule, and derive a simple closed-form expression for the top tax rate. The U-shape of optimal marginal tax rates is more pronounced than in partial equilibrium. The joint analysis of tax incidence and optimal taxation reveals that the economic insights obtained for the optimum may be reversed when considering reforms of a suboptimal tax code.

Sprache
Englisch

Erschienen in
Series: CESifo Working Paper ; No. 6089

Klassifikation
Wirtschaft
Taxation, Subsidies, and Revenue: General
Taxation and Subsidies: Efficiency; Optimal Taxation
Taxation and Subsidies: Incidence
Thema
nonlinear tax policy
tax incidence
optimal taxation
general equilibrium

Ereignis
Geistige Schöpfung
(wer)
Sachs, Dominik
Tsyvinski, Aleh
Werquin, Nicolas
Ereignis
Veröffentlichung
(wer)
Center for Economic Studies and ifo Institute (CESifo)
(wo)
Munich
(wann)
2016

Handle
Letzte Aktualisierung
20.09.2024, 08:21 MESZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Sachs, Dominik
  • Tsyvinski, Aleh
  • Werquin, Nicolas
  • Center for Economic Studies and ifo Institute (CESifo)

Entstanden

  • 2016

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