Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities
This paper derives optimal top tax rate formulas in a model where top earners respond to taxes through three channels: labor supply, tax avoidance, and compensation bargaining. The optimal top tax rate increases when there are zero-sum compensation-bargaining effects. We present empirical evidence consistent with bargaining effects. Top tax rate cuts are associated with top one percent pretax income shares increases but not higher economic growth. US CEO "pay for luck" is quantitatively more prevalent when top tax rates are low. International CEO pay levels are negatively correlated with top tax rates, even controlling for firms' characteristics and performance.
Volume (Year): 6 (2014)
Issue (Month): 1 (February)
|Contact details of provider:|| Web page: https://www.aeaweb.org/aej-policy|
More information through EDIRC
|Order Information:||Web: https://www.aeaweb.org/subscribe.html|
References listed on IDEAS
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.:
- Emmanuel Saez, 2002.
"Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses,"
The Quarterly Journal of Economics,
MIT Press, vol. 117(3), pages 1039-1073, August.
- Emmanuel Saez, 2000. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," NBER Working Papers 7708, National Bureau of Economic Research, Inc.
- Mathias Hungerb�hler & Etienne Lehmann & Alexis Parmentier & Bruno Van Der Linden, 2006.
"Optimal Redistributive Taxation in a Search Equilibrium Model,"
Review of Economic Studies,
Oxford University Press, vol. 73(3), pages 743-767.
- Hungerbühler, Mathias & Lehmann, Etienne & Parmentier, Alexis & Van der Linden, Bruno, 2005. "Optimal Redistributive Taxation in a Search Equilibrium Model," IZA Discussion Papers 1460, Institute for the Study of Labor (IZA).
- Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
- Anthony Atkinson & Thomas Piketty, 2010. "Top Incomes : A Global Perspective," Post-Print halshs-00754875, HAL.
- Henrik Jacobsen Kleven & Camille Landais & Emmanuel Saez, 2013.
"Taxation and International Migration of Superstars: Evidence from the European Football Market,"
American Economic Review,
American Economic Association, vol. 103(5), pages 1892-1924, August.
- Kleven, Henrik & Landais, Camille & Saez, Emmanuel, 2010. "Taxation and International Migration of Superstars: Evidence from the European Football Market," CEPR Discussion Papers 8134, C.E.P.R. Discussion Papers.
- Henrik Kleven & Camille Landais & Emmanuel Saez, 2010. "Taxation and International Migration of Superstars: Evidence from the European Football Market," NBER Working Papers 16545, National Bureau of Economic Research, Inc.
- Atkinson, A. B. & Piketty, Thomas (ed.), 2010. "Top Incomes: A Global Perspective," OUP Catalogue, Oxford University Press, number 9780199286898.
- Garvey, Gerald T. & Milbourn, Todd T., 2006. "Asymmetric benchmarking in compensation: Executives are rewarded for good luck but not penalized for bad," Journal of Financial Economics, Elsevier, vol. 82(1), pages 197-225, October.
- Anthony Atkinson & Thomas Piketty & Emmanuel Saez, 2011.
"Top Incomes in the Long Run of History,"
- Lindsey, Lawrence B., 1987. "Individual taxpayer response to tax cuts: 1982-1984 : With implications for the revenue maximizing tax rate," Journal of Public Economics, Elsevier, vol. 33(2), pages 173-206, July.
- Stiglitz, Joseph E., 1982.
"Self-selection and Pareto efficient taxation,"
Journal of Public Economics,
Elsevier, vol. 17(2), pages 213-240, March.
- Casey Rothschild & Florian Scheuer, 2011.
"Optimal Taxation with Rent-Seeking,"
NBER Working Papers
17035, National Bureau of Economic Research, Inc.
- Casey Rothschild & Florian Scheuer, 2012.
"Redistributive Taxation in the Roy Model,"
NBER Working Papers
18228, National Bureau of Economic Research, Inc.
- Atkinson, Tony & Leigh, Andrew, 2010.
"The Distribution of Top Incomes in Five Anglo-Saxon Countries over the Twentieth Century,"
IZA Discussion Papers
4937, Institute for the Study of Labor (IZA).
- A B Atkinson & Andrew Leigh, 2010. "The Distribution of Top Incomes in Five Anglo-Saxon Countries over the Twentieth Century," CEPR Discussion Papers 640, Centre for Economic Policy Research, Research School of Economics, Australian National University.
- Chiaki Moriguchi & Emmanuel Saez, 2008. "The Evolution of Income Concentration in Japan, 1886-2005: Evidence from Income Tax Statistics," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 713-734, November.
- Saez, Emmanuel, 2004.
"Direct or indirect tax instruments for redistribution: short-run versus long-run,"
Journal of Public Economics,
Elsevier, vol. 88(3-4), pages 503-518, March.
- Emmanuel Saez, 2002. "Direct or Indirect Tax Instruments for Redistribution: Short-run versus Long-run," NBER Working Papers 8833, National Bureau of Economic Research, Inc.
- Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2009. "Why Can Modern Governments Tax So Much? An Agency Model of Firms as Fiscal Intermediaries," NBER Working Papers 15218, National Bureau of Economic Research, Inc.
- Aronsson, Thomas & Sjögren, Tomas, 2002.
"Is the Optimal Labor Income Tax Progressive in a Unionized Economy?,"
Umeå Economic Studies
587, Umeå University, Department of Economics.
- Thomas Aronsson & Tomas Sjögren, 2004. "Is the Optimal Labor Income Tax Progressive in a Unionized Economy?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(4), pages 661-675, December.
- Randall A. Heron & Erik Lie, 2009. "What Fraction of Stock Option Grants to Top Executives Have Been Backdated or Manipulated?," Management Science, INFORMS, vol. 55(4), pages 513-525, April.
When requesting a correction, please mention this item's handle: RePEc:aea:aejpol:v:6:y:2014:i:1:p:230-71. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros)or (Michael P. Albert)
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.