Tax buyouts

Marco Del Negro, Fabrizio Perri and Fabiano Schivardi

No 441, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: The paper studies a fiscal policy instrument that can reduce fiscal distortions without affecting revenues, in a politically viable way. The instrument is a private contract (tax buyout), offered by the government to each citizen, whereby the citizen can choose to pay a fixed price in exchange for a given reduction in her tax rate for a period of time. We introduce the tax buyout in a dynamic overlapping generations economy, calibrated to match several features of the US income, taxes and wealth distribution. Under simple pricing, the introduction of the buyout is revenue neutral but, by reducing distortions, it benefits a significant fraction of the population and leads to sizable increases in aggregate labor supply, income and consumption.

Keywords: Taxation (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-dge and nep-pbe
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Citations: View citations in EconPapers (1)

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http://www.minneapolisfed.org/research/SR/SR441.pdf

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Journal Article: Tax buyouts (2010)
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Working Paper: Tax buyouts (2010)
Working Paper: Tax buyouts (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmsr:441

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