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Optimal Taxation in Theory and Practice

  • N. Gregory Mankiw
  • Matthew Weinzierl
  • Danny Yagan

The optimal design of a tax system is a topic that has long fascinated economic theorists and flummoxed economic policymakers. This paper explores the interplay between tax theory and tax policy. It identifies key lessons policymakers might take from the academic literature on how taxes ought to be designed, and it discusses the extent to which these lessons are reflected in actual tax policy.

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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 23 (2009)
Issue (Month): 4 (Fall)
Pages: 147-74

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Handle: RePEc:aea:jecper:v:23:y:2009:i:4:p:147-74
Note: DOI: 10.1257/jep.23.4.147
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  1. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
  2. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
  3. Borys Grochulski & Tomasz Piskorski, 2007. "Risky human capital and deferred capital income taxation," Working Paper 06-13, Federal Reserve Bank of Richmond.
  4. Louis Kaplow, 2008. "Taxing Leisure Complements," NBER Working Papers 14397, National Bureau of Economic Research, Inc.
  5. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
  6. Alberto Alesina & Andrea Ichino & Loukas Karabarbounis, 2007. "Gender Based Taxation and the Division of Family Chores," NBER Working Papers 13638, National Bureau of Economic Research, Inc.
  7. Louis Kaplow, 2008. "Optimal Policy with Heterogeneous Preferences," NBER Working Papers 14170, National Bureau of Economic Research, Inc.
  8. Mikhail Golosov & Aleh Tsyvinski, 2004. "Designing Optimal Disability Insurance: A Case for Asset Testing," NBER Working Papers 10792, National Bureau of Economic Research, Inc.
  9. Marek Kapicka, 2006. "The Dynamics of Optimal Taxation when Human Capital is Endogenous," 2006 Meeting Papers 349, Society for Economic Dynamics.
  10. Gruber, Jon & Saez, Emmanuel, 2002. "The elasticity of taxable income: evidence and implications," Journal of Public Economics, Elsevier, vol. 84(1), pages 1-32, April.
  11. Kenneth L. Judd, 1982. "Redistributive Taxation in a Simple Perfect Foresight Model," Discussion Papers 572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Naito, Hisahiro, 1999. "Re-examination of uniform commodity taxes under a non-linear income tax system and its implication for production efficiency," Journal of Public Economics, Elsevier, vol. 71(2), pages 165-188, February.
  13. Mikhail Golosov & Narayana R. Kocherlakota & Aleh Tsyvinski, 2001. "Optimal indirect and capital taxation," Staff Report 293, Federal Reserve Bank of Minneapolis.
  14. Narayana Kocherlakota, 2004. "Zero Expected Wealth Taxes: A Mirrlees Approach to Dynamic Optimal Taxation," Levine's Bibliography 122247000000000729, UCLA Department of Economics.
  15. Diamond, P., 1994. "Optimal Income Taxation: An Exemple with a U-Shaped Pattern of Optimal Marginal Tax Rates," Working papers 94-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  16. Conesa, Juan Carlos & Kitao, Sagiri & Krueger, Dirk, 2006. "Taxing Capital? Not a Bad Idea After All!," CEPR Discussion Papers 5929, C.E.P.R. Discussion Papers.
  17. Mikhail Golosov & Aleh Tsyvinski & Ivan Werning, 2007. "New Dynamic Public Finance: A User's Guide," NBER Chapters, in: NBER Macroeconomics Annual 2006, Volume 21, pages 317-388 National Bureau of Economic Research, Inc.
  18. Marek Kapicka, 2006. "Optimal Income Taxation with Human Capital Accumulation and Limited Record Keeping," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(4), pages 612-639, October.
  19. Saez, Emmanuel, 2001. "Using Elasticities to Derive Optimal Income Tax Rates," Review of Economic Studies, Wiley Blackwell, vol. 68(1), pages 205-29, January.
  20. N. Gregory Mankiw, 2000. "The Savers-Spenders Theory of Fiscal Policy," NBER Working Papers 7571, National Bureau of Economic Research, Inc.
  21. Stefania Albanesi & Christopher Sleet, 2004. "Dynamic optimal taxation with private information," Discussion Paper / Institute for Empirical Macroeconomics 140, Federal Reserve Bank of Minneapolis.
  22. Deaton, Angus, 1979. "Optimally uniform commodity taxes," Economics Letters, Elsevier, vol. 2(4), pages 357-361.
  23. N. Gregory Mankiw & Matthew Weinzierl, 2009. "The Optimal Taxation of Height: A Case Study of Utilitarian Income Redistribution," NBER Working Papers 14976, National Bureau of Economic Research, Inc.
  24. Stefania Albanesi, 2006. "optimal taxation of entrepreneurial capital with private information," 2006 Meeting Papers 310, Society for Economic Dynamics.
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  29. Martin Feldstein, 1993. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the1986 Tax Reform Act," NBER Working Papers 4496, National Bureau of Economic Research, Inc.
  30. Michel Strawczynski & Momi Dahan, 2000. "Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates: Comment," American Economic Review, American Economic Association, vol. 90(3), pages 681-686, June.
  31. Kaplow Louis, 2008. "Optimal Policy with Heterogeneous Preferences," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-30, September.
  32. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  33. Salanié, Bernard, 2011. "The Economics of Taxation," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262016346, June.
  34. Tuomala, Matti, 1990. "Optimal Income Tax and Redistribution," OUP Catalogue, Oxford University Press, number 9780198286059.
  35. Loukas Karabarbounis & Andrea Ichino & Alberto Alesina, 2008. "Gender based Taxation," 2008 Meeting Papers 500, Society for Economic Dynamics.
  36. Feldstein, Martin, 1995. "Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Scholarly Articles 2766676, Harvard University Department of Economics.
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