The Welfare Gains of Age Related Optimal Income Taxation
CONPUBBLICA Working Paper Series No. 151
49 Pages Posted: 4 Mar 2012
There are 2 versions of this paper
The Welfare Gains of Age Related Optimal Income Taxation
Date Written: October 2010
Abstract
Using a calibrated overlapping generations model we quantify the welfare gains of an age dependent income tax. Agents face uncertainty regarding future abilities and can by saving transfer consumption across periods. The welfare gain of switching from an age-independent to an age-dependent nonlinear tax amounts in our benchmark model to around three percent of GDP. The gains are particularly high when there are restrictions on debt policy. The gains of using a nonlinear - as opposed to a linear tax are even larger. Surprisingly, it is of secondary importance to optimally choose the tax on interest income.
Keywords: labor income taxation, capital income taxation, age-dependent taxes, OLG model
JEL Classification: H21, H23, H24
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Relational Contracts, Taxation and the Household
By Patricia F. Apps and Ray Rees
-
Collective Labour Supply: Heterogeneity and Nonparticipation
-
Collective Labour Supply: Heterogeneity and Non-Participation
-
Household Intertemporal Behavior: A Collective Characterization and a Test of Commitment
-
Gender Based Taxation and the Division of Family Chores
By Alberto F. Alesina, Andrea Ichino, ...
-
Gender Based Taxation and the Division of Family Chores
By Alberto F. Alesina, Andrea Ichino, ...
-
Gender Based Taxation and the Division of Family Chores
By Alberto F. Alesina, Andrea Ichino, ...