Optimal Nonlinear Savings Taxation
Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
This paper analyses the design of optimal nonlinear savings taxation, in a multi-period consumption-savings economy where consumers face persistent, uninsurable shocks to the marginal value that they place on consuming. Its main contributions are: (a) to show that shocks of this kind generically justify positive marginal savings taxes, and (b) to characterise these taxes by reference to a limited number of sufficient statistics. The method for obtaining this characterisation is generalisable, and provides a roadmap for reconnecting â€˜Mirrleesianâ€™ and â€˜sufficient statisticsâ€™ approaches to dynamic taxation. Intuitively, dynamic asymmetric information problems imply significant restrictions on intertemporal consumption elasticities. These restrictions keep sufficient statistics representations manageable, despite the multi-dimensional choice setting.
Keywords: Nonlinear Taxation; Sufficient Statistics; Mirrleesian Taxation; New Dynamic Public Finance (search for similar items in EconPapers)
JEL-codes: D82 E21 E61 H21 H24 H30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:2221
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