The Welfare Gains of Age Related Optimal Income Taxation
AbstractUsing a calibrated overlapping generations model we quantify the welfare gains of an age dependent income tax. Agents face uncertainty regarding future abilities and can by saving transfer consumption across periods. The welfare gain of switching from an age-independent to an age-dependent nonlinear tax amounts in our benchmark model to around three percent of GDP. The gains are particularly high when there are restrictions on debt policy. The gains of using a nonlinear- as opposed to a linear tax are even larger. Surprisingly, it is of secondary importance to optimally choose the tax on interest income.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3225.
Date of creation: 2010
Date of revision:
labor income taxation; capital income taxation; age-dependent taxes; OLG model;
Other versions of this item:
- Spencer Bastani & Sören Blomquist & Luca Micheletto, 2013. "The Welfare Gains Of Age‐Related Optimal Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 1219-1249, November.
- Bastani, Spencer & Blomquist, Sören & Micheletto, Luca, 2010. "The Welfare Gains of Age Related Optimal Income Taxation," Working Paper Series, Center for Fiscal Studies 2010:12, Uppsala University, Department of Economics.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
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- Alberto Alesina & Andrea Ichino & Loukas Karabarbounis, 2007.
"Gender Based Taxation and the Division of Family Chores,"
NBER Working Papers
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- The welfare gain from age-dependent taxation
by Economic Logician in Economic Logic on 2010-11-22 15:27:00
- Bastani, Spencer, 2013. "Using the Discrete Model to Derive Optimal Income Tax Rates," Working Paper Series, Center for Fiscal Studies 2013:11, Uppsala University, Department of Economics.
- Lasse Frisgaard Gunnersen & Bo Sandemann Rasmussen, 2012. "Optimal Tax-Transfer Policies, Life-Cycle Labour Supply and Present-Biased Preferences," Economics Working Papers 2012-12, School of Economics and Management, University of Aarhus.
- Spencer Bastani, 2013.
"Gender-based and couple-based taxation,"
International Tax and Public Finance,
Springer, vol. 20(4), pages 653-686, August.
- Ooghe, Erwin & Peichl, Andreas, 2014. "Fair and efficent taxation under partial control," ZEW Discussion Papers 14-002, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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