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Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities

Author Info

Listed author(s):
  • Stefanie Stantcheva

    (MIT)

  • Emmanuel Saez

    (University of California Berkeley)

  • Thomas Piketty

    (Paris School of Economics)

Abstract

We then analyze top income and top tax rate data in 18 OECD countries. There is a strong correlation between cuts in top tax rates and increases in top 1% income shares since 1975, implyingthat the overall elasticity is large. But top income share increases have not translated into higher economic growth, consistent with the zero-sum bargaining model. This suggests that the first elasticity is modest in size and that the overall effect comes mostly from the third elasticity. Consequently, socially optimal top tax rates might possibly be much higher than what is commonly assumed.

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File URL: https://economicdynamics.org/meetpapers/2012/paper_78.pdf
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Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 78.

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Date of creation: 2012
Handle: RePEc:red:sed012:78
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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Find related papers by JEL classification:
  • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
  • 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
  • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
  • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Given the enormity of the short- and long-run fiscal challenges facing the US, the lack of policy detail from both presidential candidates is disappointing
    by Blog Admin in British Politics and Policy at LSE on 2012-10-25 13:00:36
  2. Taxes & growth
    by chris dillow in Stumbling and Mumbling on 2014-01-27 14:49:16
  3. Inequality: a missing perspective
    by chris dillow in Stumbling and Mumbling on 2014-04-24 13:28:09
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