Optimal taxation with home production

Optimal taxes for Europe and the U.S. are derived in a realistically calibrated model in which agents buy consumption goods and services and use home capital and labor to produce household services. The optimal tax rate on services is substantially lower than the tax rate on goods. Specifically, the planner cannot tax home production directly and instead lowers the tax rate on market services to increase the relative price of home production. The optimal tax rate on the return to home capital is strictly positive and the welfare gains from switching to optimal taxes are large.     

最优所得税理论与我国个人所得税的实践

最优所得税理论一诞生,就受到了广泛关注。一些学者用不同模型阐述了最优所得税理论。虽毋须严格按照这些模型来设计我国的个人所得税制度,但其模型所体现的税制设计理念或思想对现阶段我国个人所得税制度的设计具有一定的参考价值。     

Optimal human capital policies

We analyze optimal income taxes and optimal schooling subsidies in a dynamic private information economy with observable human capital accumulation. We show that under plausible conditions the marginal schooling subsidies are positive and that they are zero at both endpoints of the skill distribution.We compute the optimal policies and evaluate their impact over the transition and at the steady state. We find that the optimal schooling policies are significantly smaller than the optimal marginal income taxes. If optimal schooling policies are introduced jointly with optimal income taxes then their welfare and aggregate effects are small. However, if income taxes are not set optimally then the optimal schooling policies have significant welfare and aggregate effects.     

Optimal commodity taxation with duty-free shopping

International travellers are frequently offered the opportunity to purchase a certain quantity of goods duty-free. Individuals differ in their opportunities to benefit from duty-free shopping, and we focus on the implications of these differences for optimal commodity taxation within a version of the optimal tax model of Mirrlees (Review of Economic Studies, 38, 175–208, 1971). We show how duty-free alters the constraints on the use of commodity taxes to reduce the distortionary costs of income taxation or to reflect externalities. Beyond characterising optimal taxes in the duty-free regime, we discuss conditions under which allowing duty-free would increase or reduce social welfare.      

Disability insurance and optimal income taxation

This paper studies the design of disability insurance scheme when agents differ in their privately known productivity. We extend the Diamond and Mirrlees (1978) two period model to allow for agents differing ex-ante in their productivity and characterize the optimal nonlinear tax transfer that maximizes a utilitarian welfare function when per-period earnings and age are observable while individuals’ productivity and health status are not observable. We show that the induced tax/benefit scheme should exhibit a marginal income tax that decreases with age for some agents. A marginal subsidy on the young high productive income may be desirable. While the disability scheme always involves the old low productive agents to be indifferent between working and claiming disability benefits, this result is not always true for the old high productive agents. JEL Classification H55 · H23 · E62     

Optimal Income Taxation and the Ability Distribution: Implications for Migration Equilibria

As recently argued by Diamond (1998), one of the key factors explaining the progressivity of an optimal non-linear income tax is the distribution of productivity among workers. Migration is one source of changes in the productivity distribution. How changes in the populations ability distribution affect optimal income tax schedules has received little attention. Changing the distribution generally affects both the objective function and the government budget constraint. We first consider the comparative statics of the fraction of highly-skilled workers with maximin and maximax welfare functions (so that only the second effect is present) and a quasi-linear utility function. We also present some results for a utilitarian social welfare function.We then study the interaction between mobility and redistributive taxation. We consider mobility by either the skilled or unskilled population under majority voting where governments take the population as fixed. If individuals choose to relocate independently, having identical ability distributions is always a stable equilibrium when the unskilled are the mobile group. However, this is not always the case when the skilled are mobile. If groups of individuals can choose where to locate, having identical ability distributions across regions is only an equilibrium when the mobile type has an overall majority.     

Optimal taxation and redistribution in an OLG model with unemployment

This paper concerns redistribution via nonlinear income taxation in an overlapping generations model with two ability-types. We assume that the wage rates are determined by bargaining between unions and firms, meaning that the equilibrium is characterized by involuntary unemployment. We show that the policy instruments that are used to calculate the marginal labor income tax rate for each ability-type give rise to intertemporal tax base effects. In addition, since the relationship between the employment and the capital stock implies intertemporal production inefficiency at the second best optimum, imperfect competition in the labor market may itself justify capital income taxation.      

Optimal taxation in the presence of bailouts

The termination of a representative financial firm due to excessive leverage may lead to substantial bankruptcy costs. A government in the tradition of Ramsey (1927) may be inclined to provide transfers to the firm so as to prevent its liquidation and the associated deadweight costs. It is shown that the optimal taxation policy to finance such transfers exhibits procyclicality and history dependence, even in a complete market. These results are in contrast with pre-existing literature on optimal fiscal policy, and are driven by the endogeneity of the transfer payments that are required to salvage the financial firm.     

Optimal income transfers

A substantial literature addresses the design of transfer programs and policies, including the negative income tax, other means-tested transfers, the earned income tax credit, categorical assistance, and work inducements. This work is largely independent of that on the optimal nonlinear income tax, yet formulations of such a tax necessarily address how low-income individuals should be treated. This paper draws on the optimal income taxation literature to illuminate the analysis of transfer programs, including the level and shape of marginal tax rates (including phase-outs), the structure of categorical assistance, and the role of work inducements in an optimal income transfer scheme. JEL Classification H21 · H53 · I38     

A comment on the role of prices for excludable public goods

Blomquist and Christensen [(2005). The role of prices for excludable public goods, International Tax and Public Finance, 12 ,61–79] argue that welfare is initially decreasing in the price of an excludable public good and that the case for a positive price for an excludable public good price is weak. We argue that this result follows from their particular characterization of the public good and that an alternative and equally reasonable characterization overturns their result. Hence, the policy case for a positive price on the public good is stronger than Blomquist and Christiansen suggest. JEL Classification H21 · H41