Arbeitspapier

Age Related Optimal Income Taxation

The focus of the present paper is on the intragenerational effects of nonlinear income taxation in a multiperiod framework. We investigate whether it is possible to achieve redistribution at smaller efficiency costs by enlarging the message space adopted in standard tax system (which only includes reported income) to consider also the age of taxpayers. Since it would be awkward to analyze an age related tax without taking into account the time-dimension, we use an intertemporal extension of the Stiglitz-Stern (1982, 1982) discrete adaptation of the Mirrlees (1971) optimal income taxation model. In the simplest version of the model we neglect the possibility of savings. This case can be interpreted as a situation with extreme liquidity constraints. It is shown that switching to an age related tax system opens the way for a Pareto improving tax reform entailing a cut in marginal tax rates for young agents. In a second version of the model we retain the possibility of savings and, assuming that the policy maker can tax interest incomes on a linear scale, we also analyze the optimal values of the interest income tax rate for the age dependent and the age independent tax systems.

Sprache
Englisch

Erschienen in
Series: Working Paper ; No. 2003:7

Klassifikation
Wirtschaft
Taxation and Subsidies: Efficiency; Optimal Taxation
Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
Thema
Optimal taxation
age specific taxes
tagging
Optimale Besteuerung
Altersgruppe
Theorie

Ereignis
Geistige Schöpfung
(wer)
Blomquist, Sören
Micheletto, Luca
Ereignis
Veröffentlichung
(wer)
Uppsala University, Department of Economics
(wo)
Uppsala
(wann)
2003

Handle
URN
urn:nbn:se:uu:diva-4461
Letzte Aktualisierung
20.09.2024, 08:22 MESZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Blomquist, Sören
  • Micheletto, Luca
  • Uppsala University, Department of Economics

Entstanden

  • 2003

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