The Laffer curve for high incomes

Jacob Lundberg

No 2017:9, Working Paper Series from Uppsala University, Department of Economics

Abstract: An expression for the Laffer curve for high incomes is derived, assuming a constant Pareto parameter and elasticity of taxable income. The peak of this Laffer curve is given by the well-known Saez (2001) expression. Microsimulations using Swedish population data show that the simulated curve matches the theoretically derived Laffer curve well, suggesting that the analytical expression is not too much of a simplification. Policy conclusions do not change much when income effects are taken into account. A country-level dataset of top effective marginal tax rates and Pareto parameters is assembled. This is used to draw Laffer curves for 27 OECD countries. Revenue-maximizing tax rates and degrees of self-financing for a small tax cut are also computed. The results indicate that degrees of self-financing range between 28 and 195 percent. Five countries have higher tax rates than the peak of the Laffer curve.

Keywords: Laffer curve; income taxation; Pareto parameter; elasticity of taxable income (search for similar items in EconPapers)
JEL-codes: H21 H24 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2017-08-31
New Economics Papers: this item is included in nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://uu.diva-portal.org/smash/get/diva2:1148666/FULLTEXT01.pdf (application/pdf)

Related works:
Working Paper: The Laffer curve for high incomes (2017)
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:2017_009

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 ().