Dynamic Income Taxation without Commitment: Comparing Alternative Tax Systems
AbstractThis paper addresses the question as to whether it is optimal to use separating or pooling nonlinear income taxation, or to use linear income taxation, when the government cannot commit to its future tax policy. We consider both two-period and infinite-horizon settings. Under empirically plausible parameter values, separating income taxation is optimal in the two-period model, whereas linear income taxation is optimal when the time horizon is infinite. The welfare effects of varying the discount rate, the degree of wage inequality, and the population of high-skill workers are also explored. For realistic changes in these parameters, separating income taxation remains optimal in the two-period formulation, and linear income taxation remains optimal in the infinite-horizon model.
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.
Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 10/15.
Date of creation: Jun 2010
Date of revision:
Contact details of provider:
Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
Phone: (0)1904 323776
Fax: (0)1904 323759
Web page: http://www.york.ac.uk/economics/
More information through EDIRC
Dynamic Income Taxation; Commitment.;
Other versions of this item:
- Jang-Ting Guo & Alan Krause, 2010. "Dynamic Income Taxation without Commitment: Comparing Alternative Tax Systems," Working Papers 201005, University of California at Riverside, Department of Economics, revised Jun 2010.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-07-10 (Accounting & Auditing)
- NEP-ALL-2010-07-10 (All new papers)
- NEP-DGE-2010-07-10 (Dynamic General Equilibrium)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jang-Ting Guo & Alan Krause, 2008.
"Optimal Nonlinear Income Taxation with Habit Formation,"
200810, University of California at Riverside, Department of Economics, revised Aug 2008.
- Jangâ€Ting Guo & Alan Krause, 2011. "Optimal Nonlinear Income Taxation with Habit Formation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(3), pages 463-480, 06.
- Jang-Ting Guo & Alan Krause, 2010. "Optimal Dynamic Nonlinear Income Taxation under Loose Commitment," Discussion Papers 10/23, Department of Economics, University of York.
- Jang-Ting Guo & Alan Krause, .
"Dynamic Nonlinear Income Taxation with Quasi-Hyperbolic Discounting and No Commitment,"
11/16, Department of Economics, University of York.
- Jang-Ting Guo & Alan Krause, 2014. "Dynamic Nonlinear Income Taxation with Quasi-Hyperbolic Discounting and No Commitment," Working Papers 201415, University of California at Riverside, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paul Hodgson).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.