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Age-Dependent Taxation and the Optimal Retirement Benefit Formula

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  • Mathias Kifmann

Abstract

This paper presents a comprehensive view of lifetime taxation including both explicit taxation through the general tax system and implicit taxation via the retirement benefit formula. Differences in productivity between individuals are unobservable, which provides a rationale for the use of distortionary taxes. It is shown that the optimal structure of age-dependent taxation can be characterized by a generalized Ramsey formula. Furthermore, the paper derives the optimal retirement benefit formula in the presence of the general tax system and examines the compatibility with the financial stability of the pension system. Copyright Verein für Socialpolitik and Blackwell Publishing Ltd. 2008.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0475.2008.00423.x
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Bibliographic Info

Article provided by Verein für Socialpolitik in its journal German Economic Review.

Volume (Year): 9 (2008)
Issue (Month): (02)
Pages: 41-64

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Handle: RePEc:bla:germec:v:9:y:2008:i::p:41-64

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References

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  1. Hans-Werner Sinn, 2000. "Why a Funded Pension System is Useful and Why It is Not Useful," NBER Working Papers 7592, National Bureau of Economic Research, Inc.
  2. Robert Fenge & Silke Uebelmesser & Martin Werding, 2006. "On the Optimal Timing of Implicit Social Security Taxes Over the Life Cycle," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(1), pages 68-107, March.
  3. Matthias Wrede, 1999. "Pareto Efficient Pay-as-You-Go Pension Systems with Multi-Period Lives," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 219(3+4), pages 494-503, September.
  4. Butler, Monika, 2002. " Tax-Benefit Linkages in Pension Systems: A Note," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(3), pages 405-15.
  5. Gervais, Martin, 2012. "On the optimality of age-dependent taxes and the progressive U.S. tax system," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 682-691.
  6. Robert Fenge & Silke Uebelmesser & Martin Werding, 2002. "Second-best Properties of Implicit Social Security Taxes: Theory and Empirical Evidence," CESifo Working Paper Series 743, CESifo Group Munich.
  7. Klaus Beckmann, 2000. "A Note on the Tax Rate implicit in Contributions to Pay-as-you-go Public Pension Systems," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(1), pages 63-, September.
  8. Michael Hoy & John Livernois & Chris McKenna & Ray Rees & Thanasis Stengos, 2011. "Mathematics for Economics," MIT Press Books, The MIT Press, edition 3, volume 1, number 0262516225, January.
  9. Jean-Marie Lozachmeur, 2006. "Optimal Age-Specific Income Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(4), pages 697-711, October.
  10. Erosa, Andres & Gervais, Martin, 2002. "Optimal Taxation in Life-Cycle Economies," Journal of Economic Theory, Elsevier, vol. 105(2), pages 338-369, August.
  11. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  12. Assar Lindbeck & Mats Persson, 2003. "The Gains from Pension Reform," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 74-112, March.
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Cited by:
  1. Manuel Kallweit, 2009. "Rentenreform und Rentenzugangsentscheidung – Eine numerische Gleichgewichtsanalyse," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 229(4), pages 426-449, August.
  2. Martin Werding, 2007. "Versicherungsmathematisch korrekte Rentenabschläge für die gesetzliche Rentenversicherung," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 60(16), pages 19-32, 08.
  3. Kerstin Roeder, 2009. "Optimal taxes and pensions in a society with myopic agents," Working Papers 2009/28, Institut d'Economia de Barcelona (IEB).

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