Optimal age specific income taxation

Jean-Marie Lozachmeur

No 2002046, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper studies optimal earnings taxation in a three period life cycle model where the taxes raised to finance an exogenous amount of public expenditure are allowed to be differentiated across ages. Agents choose their level of education when young and their age of retirement when old. We first look at the problem of optimal taxation when the young can borrow and then turn to the case where young face borrowing constraints. It is shown that, without borrowing constraints, a first best optimum can be decentralized by setting a zero tax rate in the third period and a first period tax lower than the second one.With the borrowing constraint, the government may not be able restore intertemporal efficiency in which case a zero tax rate when old may not be optimal.

Keywords: life cycle; optimal income taxation (search for similar items in EconPapers)
JEL-codes: D91 H21 (search for similar items in EconPapers)
Date: 2002-09
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Optimal Age‐Specific Income Taxation (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2002046

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