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Dynamic Tax Reforms

  • Nicolas Werquin

    (Yale University)

  • Aleh Tsyvinski

    (Yale University)

  • Mikhail Golosov

    (Princeton University)

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    This paper derives novel formulas for the welfare gains of any tax reform around initial (optimal or suboptimal) dynamic tax systems. We use a perturbation-based method to express these formulas in terms of easily interpretable and empirically estimable parameters: elasticities of income and savings with respect to the tax rates, and the shape of the income and savings distributions. This generates new theoretical insights about dynamic optimal taxes, as well as policy implications regarding directions of tax reforms of the current US tax code.

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    Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 879.

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    Date of creation: 2013
    Date of revision:
    Handle: RePEc:red:sed013:879
    Contact details of provider: Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA
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