Corpus ID: 17936581

The Redistributive Benefits of Progressive Labor Income Taxation : How Large Should Top Marginal Tax Rates Be ?

  title={The Redistributive Benefits of Progressive Labor Income Taxation : How Large Should Top Marginal Tax Rates Be ?},
  author={Fabian Kindermann and Dirk Krueger},
In this paper we argue that very high marginal labor income tax rates are an effective tool for social insurance even when households have preferences with high labor supply elasticity, make dynamic savings decisions, and policies have general equilibrium effects. To make this point we construct a large scale Overlapping Generations Model with uninsurable labor productivity risk, show that it has a wealth distribution that matches the data well, and then use it to characterize fiscal policies… 
The Glass Ceiling and the Paper Floor: Gender Differences Among Top Earners, 1981-2012
We analyze changes in the gender structure at the top of the earnings distribution in the United States over the last 30 years using a 10% sample of individual earnings histories from the Social


On the Distributional Effects of Reducing Capital Taxes
We investigate the welfare implications of changing the mix between capital and labor taxes for a model economy in which heterogeneous households face uninsurable labor income risk. The stochastic
Taxing Capital? Not a Bad Idea after All!
In this paper we quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic, uninsurable income shocks, where households also differ
Optimal Capital Income Taxation and Redistribution
This paper studies the effects of agent heterogeneity on optimal capital income taxes, where taxes are collected for redistributional purposes. In a finite horizon model with an arbitrary number of
Aggregate and Distributional Effects of Increasing Taxes on Top Income Earners
We analyze the macroeconomic implications of increasing the top marginal income tax rate using a dynamic general equilibrium framework with heterogeneous agents and a fiscal structure resembling the
Heterogeneity and Government Revenues: Higher Taxes at the Top?
We evaluate the effectiveness of a more progressive tax scheme in raising government revenues. We develop a life-cycle economy with heterogeneity and endogenous labor supply. Households face a
On the Optimality of Progressive Income Redistribution
We compute the optimal non-linear tax policy for a dynastic economy with uninsurable risk, where generations are linked by dynastic wealth accumulation and correlated incomes. Unlike earlier studies,
How Does Tax Progressivity and Household Heterogeneity Affect Laffer Curves?
How much additional tax revenue can the government generate by increasing labor income taxes? In this paper we provide a quantitative answer to this question, and study the importance of the
On the Desirability of Taxing Capital Income in Optimal Social Insurance
This paper analyzes optimal linear taxes on labor income and savings in a two-period life-cycle model with ex ante identical households, endogenous leisure demands in both periods, and general
On the Optimal Progressivity of the Income Tax Code
This paper computes the optimal progressivity of the income tax code in a dynamic general equilibrium model with household heterogeneity in which uninsurable labor productivity risk gives rise to a
Optimal Taxation with Current and Future Cohorts
This note demonstrates that optimal tax calculations in overlapping generations models should not be based exclusively on long-run welfare changes. As the latter represent a mix of efficiency and