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Dynamic Tax Reforms


  • Nicolas Werquin

    (Yale University)

  • Aleh Tsyvinski

    (Yale University)

  • Mikhail Golosov

    (Princeton University)


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.

Suggested Citation

  • Nicolas Werquin & Aleh Tsyvinski & Mikhail Golosov, 2013. "Dynamic Tax Reforms," 2013 Meeting Papers 879, Society for Economic Dynamics.
  • Handle: RePEc:red:sed013:879

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