Age-Dependent Taxation and the Optimal Retirement Benefit Formula

Kifmann Mathias
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Kifmann Mathias: Universität Augsburg, Universitätsstraße 2,Augsburg, Germany

German Economic Review, 2008, vol. 9, issue 1, 41-64

Abstract: This paper presents a comprehensive view of lifetime taxation including both explicit taxation through the general tax system and implicit taxation via the retirement benefit formula. Differences in productivity between individuals are unobservable, which provides a rationale for the use of distortionary taxes. It is shown that the optimal structure of age-dependent taxation can be characterized by a generalized Ramsey formula. Furthermore, the paper derives the optimal retirement benefit formula in the presence of the general tax system and examines the compatibility with the financial stability of the pension system.

Keywords: Optimal taxation; pay-as-you-go pension systems; implicit taxation; intra- and intergenerational equity; financial stability (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1111/j.1468-0475.2008.00423.x

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