Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities
@article{Piketty2011OptimalTO, title={Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities}, author={Thomas Piketty and Emmanuel Saez and Stefanie Stantcheva}, journal={NBER Working Paper Series}, year={2011} }
This paper analyzes the problem of optimal taxation of top labour incomes. We develop a model where top incomes respond to marginal tax rates through three channels: (1) the standard supply-side channel through reduced economic activity, (2) the tax avoidance channel, (3) the compensation bargaining channel through efforts in influencing own pay setting. We derive the optimal top tax rate formula as a function of the three elasticities corresponding to those three channels of responses. The…
737 Citations
Taxation on labor income - A choice between efficiency and inequality?
- Economics
- 2016
This thesis applies a model for optimal top taxation rate on all Scandinavian countries. The starting point is a theory by Saez, Piketty and Stantcheva limiting the possible change in behavior of…
Taxing Atlas: Executive Compensation, Firm Size and Their Impact on Optimal Top Income Tax Rates
- Economics
- 2015
We study the optimal taxation of top labor incomes. Top income earners are modeled as managers who operate a span of control technology as in Rosen (1982). Managers are heterogeneous across talent,…
Higher taxes at the top? The role of tax avoidance
- EconomicsJournal of Economic Dynamics and Control
- 2021
Demand for 'The 1%':Tax Incidence and Implications for Optimal Income Tax Rates
- Economics
- 2015
We develop a model for determining the optimal high income linear tax rate when there exist imperfectly substitutable types of labor. If one type is disproportionately prevalent among higher income…
International Private Transfers and Optimal Tax Structure in Developing Economies
- Economics
- 2016
In this paper we examine the optimal tax structure for a developing economy with international inter-family transfers. Our analysis characterizes conditions to identify the main determinants of the…
Do Lower Top Marginal Tax Rates Slow the Income Growth of Workers?
- Economics
- 2016
Top marginal tax rates are positively correlated with the pretax income growth of the bottom 90 per cent — those who are not subject to the top rates. To explain this correlation, this paper presents…
Unemployment and Tax Design
- EconomicsSSRN Electronic Journal
- 2021
This paper studies the implications of unemployment for the optimal design of the tax-benefit system. To do so, I develop a directed search model where individuals face heterogeneous and uninsurable…
Top Incomes and Top Tax Rates : Implications for Optimal Taxation of Top Incomes in Finland
- Economics
- 2013
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…
References
SHOWING 1-10 OF 135 REFERENCES
Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses
- Economics
- 2000
This paper investigates the optimal income transfer problem at the low end of the income distribution. The government maximizes a social welfare function and faces the traditional equity-efficiency…
Wage bargaining, labor-tax progression, and welfare
- Economics
- 1997
This paper analyzes the effect of labor-tax progression on employment and welfare in an economy with a unionized labor market. The government influences wage bargaining through its tax policies.…
A Theory of Optimal Capital Taxation
- Economics
- 2012
This paper develops a realistic, tractable theoretical model that can be used to investigate socially-optimal capital taxation. We present a dynamic model of savings and bequests with heterogeneous…
Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates: Comment
- Economics
- 2000
Using the Mirrlees optimal income tax model with quasi-linear preferences, the paper examines conditions for marginal tax rates to be rising at high income levels and declining in an interval…
Is the Optimal Labor Income Tax Progressive in a Unionized Economy?
- Economics
- 2002
This paper concerns optimal nonlinear labor income taxation in an economy with union wage setting and endogenous hours of work. The purpose is to study the determinants of tax progression. We show…
Using Elasticities to Derive Optimal Income Tax Rates
- Economics
- 2000
This paper derives optimal income tax formulas using compensated and uncompensated elasticities of earnings with respect to tax rates. A simple formula for the high income optimal tax rate is…
The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review
- Economics
- 2009
This paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates using tax return data. First, we provide a theoretical…