Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/113099 
Year of Publication: 
2015
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2015: Ökonomische Entwicklung - Theorie und Politik - Session: Determinants of and Policies against Inequality No. G06-V3
Publisher: 
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
Abstract: 
We study optimal nonlinear taxation of labor income and linear taxation of capital income in a life-cycle framework with private information and idiosyncratic risk. We focus on simple history-independent tax instruments. We first analyze the welfare losses from this simplification as compared to optimal history-dependent policies. We find very small losses from restricting the complexity of savings wedges. Eliminating history dependence of labor wedges leads to larger welfare losses: moving from history dependence to age dependence yields approximately the same welfare losses as moving from age dependence to age independence and from nonlinear to linear income taxation. For optimal history- independent taxes, we provide a novel decomposition into a redistribution and an insurance component and a generalization of the top tax formula to dynamic environments. Capital taxation is desirable and yields sizable welfare gains, especially if labor income taxes are set below their optimal level.
JEL: 
H21
H20
H23
Document Type: 
Conference Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.