Should Marginal Tax Rates Be Equalized Through Time?
AbstractThe author derives necessary and sufficient conditions for the intertemporal equalization of optimal tax rates. The conditions in the case of wage taxes include constant elasticity labor supply and constant relative risk aversion. Wage taxes should be low in times of relatively elastic labor supply or low risk aversion. The conditions in the case of capital taxes include perfect-foresight expectations and constant relative risk aversion. If foresight is imperfect, intertemporal equality will be impeded by a covariance term; if relative risk aversion is time-varying, next period's capital tax should have the same sign as this period's change in relative risk aversion. Copyright 1991, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by MIT Press in its journal Quarterly Journal of Economics.
Volume (Year): 106 (1991)
Issue (Month): 3 (August)
Contact details of provider:
Web page: http://mitpress.mit.edu/journals/
Other versions of this item:
- Kingston, G., 1989. "Should Marginal Tax Rates Be Equalized Through Time?," Papers 89-8, New South Wales - School of Economics.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Evan Tanner & Kevin Joseph Carey, 2005. "The Perils of Tax Smoothing," IMF Working Papers 05/207, International Monetary Fund.
- Evan Tanner, 2013. "Fiscal Sustainability," IMF Working Papers 13/89, International Monetary Fund.
- Nick Draper & Alex Armstrong, 2007. "GAMMA; a simulation model for ageing, pensions and public finances," CPB Document 147, CPB Netherlands Bureau for Economic Policy Analysis.
- Fisher, Lance A. & Kingston, Geoffrey H., 2004. "Theory of tax smoothing in the small open economy," Economics Letters, Elsevier, vol. 85(1), pages 1-7, October.
- Alex Armstrong & Nick Draper & AndrÃ© Nibbelink & Ed Westerhout, 2007. "Fiscal prefunding in response to demographic uncertainty," CPB Discussion Paper 85, CPB Netherlands Bureau for Economic Policy Analysis.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karie Kirkpatrick).
If references are entirely missing, you can add them using this form.