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The Distributional Effects of Redistributional Tax Policy

Jason DeBacker (), Richard Evans (), Evan Magnusson, Kerk Phillips (), Shanthi Ramnath and Isaac Swift
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Evan Magnusson: Department of Economics, Brigham Young University
Isaac Swift: Department of Economics, Brigham Young University

No 2014-08, BYU Macroeconomics and Computational Laboratory Working Paper Series from Brigham Young University, Department of Economics, BYU Macroeconomics and Computational Laboratory

Abstract: This paper constructs a large scale overlapping generations model with heterogeneity across the lifecycle and over earnings ability types. The model is calibrated to the U.S. economy and includes realistic demographics, earnings distribution, taxes, and mortality risk. We consider the effects of two policies: an increase in income tax rates and a progressive wealth tax. We find that a more progressive income tax does not change inequality in consumption, income, or wealth across the life cycle, but it does reduce inequality across ability types. In contrast, a wealth tax reduces inequality over the life cycle, but slightly increases inequality across ability types. Inequality over ability types is greater concern than changes in equality over the lifecycle.

Keywords: inequality; Piketty; wealth tax; income tax; overlapping generations (search for similar items in EconPapers)
JEL-codes: D51 H21 H23 H30 P16 (search for similar items in EconPapers)
Pages: 71 pages
Date: 2014-10
New Economics Papers: this item is included in nep-dge, nep-ltv and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:byu:byumcl:201408

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