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Optimal top marginal tax rates under income splitting for couples

  • Bach, Stefan
  • Corneo, Giacomo
  • Steiner, Viktor

This paper provides formulas for optimal top marginal tax rates when couples are taxed according to income splitting between spouses, consumption is taxed, and the skill distribution is unbounded. Optimal top marginal income tax rates are computed for Germany using a dataset that includes the tax returns of all German top taxpayers. We find that the optimal top marginal tax rate converges to about 2/3 and convergence obtains at income levels that are substantially higher than those currently subject to the actual top tax rate.

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Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2011/21.

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Date of creation: 2011
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Handle: RePEc:zbw:fubsbe:201121
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