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Generational Bias and Tax Policy

Alan Krause

Discussion Papers from Department of Economics, University of York

Abstract: We examine the nonlinear taxation of labour income and savings when the government places more weight on the welfare of the elderly than of young people. Our analysis is motivated by the observation that the elderly are more likely to vote. Compared to optimal taxation under a utilitarian social welfare function, we show that savings are subsidised, and young low-skill workers face a higher marginal labour tax rate. We also show that the lifetime utility of low-skill individuals is reduced, and that of high-skill individuals is increased, relative to optimal taxation under utilitarianism. An extension of the model to include generation-specific public spending is also considered.

Keywords: generational policy; nonlinear taxation. (search for similar items in EconPapers)
JEL-codes: H21 H42 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-age, nep-pbe, nep-pub and nep-upt
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