The Welfare Gains of Age Related Optimal Income Taxation

Spencer Bastani, Sören Blomquist and Luca Micheletto

No 3225, CESifo Working Paper Series from CESifo

Abstract: Using a calibrated overlapping generations model we quantify the welfare gains of an age dependent income tax. Agents face uncertainty regarding future abilities and can by saving transfer consumption across periods. The welfare gain of switching from an age-independent to an age-dependent nonlinear tax amounts in our benchmark model to around three percent of GDP. The gains are particularly high when there are restrictions on debt policy. The gains of using a nonlinear- as opposed to a linear tax are even larger. Surprisingly, it is of secondary importance to optimally choose the tax on interest income.

Keywords: labor income taxation; capital income taxation; age-dependent taxes; OLG model (search for similar items in EconPapers)
JEL-codes: H21 H23 H24 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: THE WELFARE GAINS OF AGE‐RELATED OPTIMAL INCOME TAXATION (2013)
Working Paper: The Welfare Gains of Age Related Optimal Income Taxation (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3225

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