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Title:Tax buyouts PDF Logo
Authors:Del Negro, Marco
Perri, Fabrizio
Schivardi, Fabiano
Issue Date:2010
Series/Report no.:Staff Report, Federal Reserve Bank of New York 467
Abstract:The paper studies a fiscal policy instrument that can reduce fiscal distortions, without affecting revenues, in a politically viable way. The instrument is a private contract (tax buyout), offered by the government to each individual citizen, whereby the citizen can choose to pay a fixed price up front in exchange for a given reduction in her tax rate for a prespecified period of time. We consider a dynamic overlapping-generations economy, calibrated to match several features of the U.S. income and wealth distribution, and show that, under simple pricing, the introduction of the buyout is revenue neutral and at the same time can benefit a significant fraction of the population and lead to sizable increases in labor supply, income, consumption, and welfare.
Subjects:Taxes
private information
distortions
JEL:E62
H21
Document Type:Working Paper
Appears in Collections:Staff Reports, Federal Reserve Bank of New York

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