Top Incomes and Top Tax Rates: Implications for Optimal Taxation of Top Incomes in Finland

Marja Riihelä, Risto Sullström and Matti Tuomala

No 1388, Working Papers from Tampere University, Faculty of Management and Business, Economics

Abstract: We apply optimal top marginal tax rate formulas with alternative social preferences to the Finnish economy using evidence on the responsiveness of top incomes in Finland to changes in top tax rates that have taken place in Finland over the last 30 years. Based on the Finnish income distribution data (cross section) we estimated by using maximum likelihood method several two and three parameter distributions. Among two parameter distributions the Champernowne one is the best fitting for the pre-tax income distribution in Finland (1990-2010). We also recognize that there is much uncertainty particularly related to labour supply elasticity and do not simply rely on the central point estimate. It is safe to conclude from our application that the current top marginal tax rate in Finland is not close to the top of the Dupuit-Laffer curve.

Keywords: top tax rates; optimal taxation; individual incomes (search for similar items in EconPapers)
JEL-codes: C63 H21 H24 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2013-03
References: Add references at CitEc
Citations:

Downloads: (external link)
http://urn.fi/URN:ISBN:978-951-44-9102-3 First version, 2013 (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:tam:wpaper:1388

Access Statistics for this paper

More papers in Working Papers from Tampere University, Faculty of Management and Business, Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sami Remes ().