Pareto-Improving Reforms of Tax Deductions

Arbeitspapier

We analyze Pareto-efficient tax deduction rules for work-related expenses. Pareto efficiency dictates a strict rule for marginal deductions along the income distribution. An immediate implication is a recipe for designing Pareto-improving reforms. We apply our theory and simulate a Pareto-improving reform that introduces deductions for non-care household services (housekeeping, gardening, laundry) in the United States. The reform combines marginal deduction rates for household services between 55% and 85% with a slight increase in marginal tax rates.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8408

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Taxation and Subsidies: Efficiency; Optimal Taxation
• Subject: optimal taxation ; tax deduction ; Pareto-improving tax reform

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Koehne, Sebastian ; Sachs, Dominik
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/223480
• Last update: 10.03.2025, 11:44 AM CET