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Revisiting Taxes on High Incomes

Author

Listed:
  • Ayse Imrohoroglu

    (University of Southern California)

  • Cagri Kumru

    (Australian National University)

  • Jiu Lian

    (Australian National University)

  • Arm Nakornthab

    (Khon Kaen University)

Abstract

In this paper, we study income taxation in a model with entrepreneurial activity. We conduct two types of changes in tax policy: changing the overall progressivity of taxes versus changing the tax rate on the richest 1% of the population. Our results indicate that increasing the tax rate on the richest 1% of the population is more effective in raising revenues than increasing the overall progressivity of taxes as it leads to smaller declines in capital and output. We find that incorporating entrepreneurship in generating a reasonable wealth distribution leads to revenue-maximizing progressivity to be smaller than found previously. (Copyright: Elsevier)

Suggested Citation

  • Ayse Imrohoroglu & Cagri Kumru & Jiu Lian & Arm Nakornthab, 2023. "Revisiting Taxes on High Incomes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 1159-1184, December.
    • Handle: RePEc:red:issued:23-105
    DOI: 10.1016/j.red.2023.11.001
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    More about this item

    Keywords

    Entrepreneurship; taxation; progressivity; labor supply;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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