A General Equilibrium Model of Taxation That Uses Micro-Unit Data: Withan Application to the Impact of Instituting a Flat-Rate Income Tax

Joel Slemrod

No 1461, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops a methodology in integrating the information from a micro-unit data file of tax returns into the framework of a general equilibrium model of taxation with endogenous financial behavior. It discusses how the available information on capital income flows can be used to impute portfolios to households, and how these portfolios and the other observed characteristics of the households can be made consistent with expected utility maximization. In order to illustrate the value of this methodology, it is applied to a study of the general equilibrium impact of instituting a flat-rate income tax system. The analysis reveals that there would be substantial changes in the pattern of rates of return and the distribution of asset ownership.The sectoral allocation of capital does not, though, change substantially. The micro-unit data base shows that, in general, lower-income households are worse off and the higher-income households are better off, although there is substantial dispersion of welfare change within income groups. Because these results rest on a very simple model of the economy and a particular data imputation procedure and parameterization, they should not be taken literally as a guide to policy decisions. Nevertheless, they do indicate that substantial insight can be provided by integrating micro-unit data with general equilibrium tax modeling.

Date: 1984-09
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Slemrod, Joel. "A General Equilibrium Model of Taxation the Uses Micro-Unit Data: With An Application to the Impact of Instituting a Flat-Rate Income Tax," New Development in Applied General Equilibrium Analysis, ed. by J. Piggott and J. Whalley. Cambridge: Cambridge University Press, 1985.
Published as Slemrod, Joel. "A General Model Of The Behavioral Response To Taxation," International Tax and Public Finance, 2001, v8(2,Mar), 119-128.

Downloads: (external link)
http://www.nber.org/papers/w1461.pdf (application/pdf)

Related works:
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:nbr:nberwo:1461

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w1461

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().