Heterogeneity and Government revenues: Higher taxes at the top?

Nezih Guner, Martin Lopez-Daneri and Gustavo Ventura

Journal of Monetary Economics, 2016, vol. 80, issue C, 69-85

Abstract: How effective is a more progressive tax scheme in raising revenues? We answer this question in a life-cycle economy with heterogeneity across households and endogenous labor supply. Our findings show that a tilt of the U.S. income tax schedule towards high earners leads to small increases in revenue. Maximal revenue in the long run is only 6.8% higher than in our benchmark – about 0.8% of initial GDP – while revenues from all sources increase by just about 0.6%. Our conclusions are that policy recommendations of this sort are misguided if the aim is to exclusively raise government revenue.

Keywords: Taxation; Progressivity; Labor supply (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (74)

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Related works:
Working Paper: Heterogeneity and Government Revenues: Higher Taxes at the Top? (2014)
Working Paper: Heterogeneity and Government Revenues: Higher Taxes at the Top? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:80:y:2016:i:c:p:69-85

DOI: 10.1016/j.jmoneco.2016.05.002

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