Revisiting Tax on Top Income

Ayse Imrohoroglu, Cagri Kumru and Arm Nakornthab

ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics

Abstract: In this paper, we study optimal income taxation in a model with entrepreneurial activity. We conduct two types of changes in tax policy: changing the overall progressivity of taxes versus changing the tax rate of the richest 1% of the population. We study the implications of these tax policies on welfare, inequality, and government revenues. Our results indicate that increasing the overall progressivity of taxes results in lower wealth inequality and higher welfare relative to increasing the tax rate on the richest 1% of the population.

Keywords: Entrepreneurship; taxation; progressivity; labor supply (search for similar items in EconPapers)
JEL-codes: D31 E21 H2 (search for similar items in EconPapers)
Date: 2018-02
New Economics Papers: this item is included in nep-ent, nep-mac, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:acb:cbeeco:2018-660

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