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Taxing Top Earners: A Human Capital Perspective

Mark Huggett () and Alejandro Badel ()
Additional contact information
Alejandro Badel: Research Division, Federal Reserve Bank of St. Louis, http://research.stlouisfed.org/econ/badel/

No gueconwpa~14-14-02, Working Papers from Georgetown University, Department of Economics

Abstract: We assess the consequences of substantially increasing the marginal tax rate on U.S. top earners using a human capital model. The top of the model Laffer curve occurs at a 53 percent top tax rate. Tax revenues and the tax rate at the top of the Laffer curve are smaller compared to an otherwise similar model that ignores the possibility of skill change in response to a tax reform. We also show that if one applies the methods used by Diamond and Saez (2011) to provide quantitative guidance for setting the tax rate on top earners to model data then the resulting tax rate exceeds the tax rate at the top of the model Laffer curve.

Keywords: Human Capital; Marginal Tax Rates; Inequality; Laffer Curve (search for similar items in EconPapers)
JEL-codes: D91 E21 H2 J24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-hrm, nep-lab, nep-mac, nep-pbe and nep-pub
Date: 2014-07-23
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Working Paper: Taxing top earners: a human capital perspective (2014) Downloads
Working Paper: Taxing Top Earners: A Human Capital Perspective (2014) Downloads
Working Paper: Taxing Top Earners: A Human Capital Perspective (2013)
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Roger Lagunoff Professor of Economics Georgetown University Department of Economics Washington, DC 20057-1036
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