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The Optimal Elasticity of Taxable Income

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  • Joel Slemrod
  • Wojciech Kopczuk

Abstract

The strength of the behavioral response to a tax rate change depends on the environment individuals operate in, and may be manipulated by instruments controlled by the government. We first derive a measure of the social benefit to affecting this elasticity. The paper then examines this effect in the solution to the optimal income taxation problem when such an instrument is available, first in a general model and then in an example when the government chooses the income tax base.

Suggested Citation

  • Joel Slemrod & Wojciech Kopczuk, 2000. "The Optimal Elasticity of Taxable Income," NBER Working Papers 7922, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:7922
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    References listed on IDEAS

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    1. Robert A. Moffitt & Mark Wilhelm, 1998. "Taxation and the Labor Supply: Decisions of the Affluent," NBER Working Papers 6621, National Bureau of Economic Research, Inc.
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    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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