Age Related Optimal Income Taxation

Sören Blomquist and Luca Micheletto

No 2003:7, Working Paper Series from Uppsala University, Department of Economics

Abstract: The focus of the present paper is on the intragenerational effects of nonlinear income taxation in a multiperiod framework. We investigate whether it is possible to achieve redistribution at smaller efficiency costs by enlarging the message space adopted in standard tax system (which only includes reported income) to consider also the age of taxpayers. Since it would be awkward to analyze an age related tax without taking into account the time-dimension, we use an intertemporal extension of the Stiglitz-Stern (1982, 1982) discrete adaptation of the Mirrlees (1971) optimal income taxation model. In the simplest version of the model we neglect the possibility of savings. This case can be interpreted as a situation with extreme liquidity constraints. It is shown that switching to an age related tax system opens the way for a Pareto improving tax reform entailing a cut in marginal tax rates for young agents. In a second version of the model we retain the possibility of savings and, assuming that the policy maker can tax interest incomes on a linear scale, we also analyze the optimal values of the interest income tax rate for the age dependent and the age independent tax systems.

Keywords: Optimal taxation; age specific taxes; tagging (search for similar items in EconPapers)
JEL-codes: H21 H23 H24 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2003-02-07
New Economics Papers: this item is included in nep-lab and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.nek.uu.se/pdf/wp2003_7.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.nek.uu.se/pdf/wp2003_7.pdf [301 Moved Permanently]--> https://www.nek.uu.se/pdf/wp2003_7.pdf [301 Moved Permanently]--> https://www.uu.se/institution/nationalekonomiska/pdf/wp2003_7.pdf)

Related works:
Journal Article: Age‐related Optimal Income Taxation* (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:uunewp:2003_007

Access Statistics for this paper

More papers in Working Paper Series from Uppsala University, Department of Economics Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Ulrika Öjdeby ().