Age-related Optimal Income Taxation
In most countries, average income varies with age. In this paper we investigate if and how it is possible to enhance the redistributive mechanism by relating tax payments to age. Using an OLG model where some individuals are low skilled all their life while others are low skilled when young but high skilled when old, we first show how an age "dependent" optimal income tax can Pareto improve upon an age "independent" income tax. We then characterize the optimal age "dependent" income tax. A tax on interest income is part of the optimal tax structure. Copyright © The editors of the "Scandinavian Journal of Economics" 2008 .
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Volume (Year): 110 (2008)
Issue (Month): 1 (03)
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