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Optimal top marginal tax rates under income splitting for couples

Stefan Bach (), Giacomo Corneo and Viktor Steiner

European Economic Review, 2012, vol. 56, issue 6, 1055-1069

Abstract: This paper provides formulas for optimal top marginal tax rates when couples are taxed according to income splitting between spouses, consumption is taxed, and the skill distribution is unbounded. Optimal top marginal income tax rates are computed for Germany using a dataset that includes the tax returns of all German top taxpayers. We find that the optimal top marginal tax rate converges to about 2/3 and convergence obtains at income levels that are substantially higher than those currently subject to the actual top tax rate.

Keywords: Optimal income taxation; Top incomes; German income tax (search for similar items in EconPapers)
JEL-codes: D31 D72 H23 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:56:y:2012:i:6:p:1055-1069

DOI: 10.1016/j.euroecorev.2012.05.004

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European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

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