Economy at a Standstill: The Problem of High Marginal Tax Rates in Finland

Tero Kuusi, Mauri Kotamäki and Mikael Kirkko-Jaakkola

No 158, ETLA Reports from The Research Institute of the Finnish Economy

Abstract: Abstract Our analysis indicates that high marginal tax rates may diminish economic activity and weaken public finances in Finland. The existing literature credibly demonstrates that, particularly among highly productive workers, the distortive effects of taxation are more pronounced, impeding both career progression and intangible investments. Supporting research and development (R&D) activities can partially offset the adverse effects of stringent taxation. However, the innovation system should be optimized to effectively internalize the externalities associated with innovations.

Keywords: Taxation; Marginal tax rate; Laffer curve; Externalities; Intangible capital (search for similar items in EconPapers)
JEL-codes: D6 E6 H2 H3 J2 J3 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2025-02-11
New Economics Papers: this item is included in nep-acc, nep-mac, nep-pbe and nep-pub
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