Nonlinear Tax Incidence and Optimal Taxation in General Equilibrium
Aleh Tsyvinski and
Additional contact information
Dominik Sachs: University of Applied Sciences [Munich]
Aleh Tsyvinski: Yale University [New Haven]
Nicolas Werquin: TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Post-Print from HAL
We study the incidence of nonlinear labor income taxes in an economy with a continuum of endogenous wages. We derive in closed form the effects of reforming nonlinearly an arbitrary tax system, by showing that this problem can be formalized as an integral equation. Our tax incidence formulas are valid both when the underlying assignment of skills to tasks is fixed or endogenous. We show qualitatively and quantitatively that contrary to conventional wisdom, if the tax system is initially suboptimal and progressive, the general-equilibrium trickle-down forces may raise the benefits of increasing the marginal tax rates on high incomes. We finally derive a parsimonious characterization of optimal taxes.
Keywords: Optimal income taxation; Nonlinear taxes; Tax incidence; Trickle-down effects; General equilibrium (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-02952736
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Published in Econometrica, 2020, 88 (2), pp.469-493. ⟨10.3982/ECTA14681⟩
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02952736
Access Statistics for this paper
More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().