A Simulation Method to Measure the Effective Tax Rate on Highly Skilled Labor

Christina Elschner and Robert Schwager

FinanzArchiv: Public Finance Analysis, 2007, vol. 63, issue 4, 563-582

Abstract: A model is presented for simulating the level of taxes imposed on highly skilled labor. The effective average tax rate, defined as the relative wedge between employment costs and disposable income, is computed. Income and payroll taxes and social security contributions not yielding an equivalent benefit are taken into account. The compensation package consists of cash payments and old-age provision. To integrate retirement benefits and their tax treatment, an intertemporal approach is used. The results indicate a wide dispersion of effective tax rates across Europe and the U.S. Slovakia, Switzerland and the U.S. taxhighly skilled labor at a low rate. Scandinavian countries, Belgium, and Slovenia turn out to be high-tax countries.

Keywords: income tax; highly skilled labor; effective tax burden; pensions (search for similar items in EconPapers)
JEL-codes: H21 H24 H55 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (3)

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DOI: 10.1628/001522107X269023

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