Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities

Stefanie Stantcheva, Emmanuel Saez and Thomas Piketty

No 78, 2012 Meeting Papers from Society for Economic Dynamics

Abstract: We then analyze top income and top tax rate data in 18 OECD countries. There is a strong correlation between cuts in top tax rates and increases in top 1% income shares since 1975, implyingthat the overall elasticity is large. But top income share increases have not translated into higher economic growth, consistent with the zero-sum bargaining model. This suggests that the first elasticity is modest in size and that the overall effect comes mostly from the third elasticity. Consequently, socially optimal top tax rates might possibly be much higher than what is commonly assumed.

Date: 2012
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
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Related works:
Journal Article: Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities (2014)
Working Paper: Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities (2014)
Working Paper: Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities (2014)
Working Paper: Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities (2011)
Working Paper: Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities (2011)
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