Taxation of Couples under Assortative Mating

2014 ◽  
Vol 6 (3) ◽  
pp. 155-177 ◽  
Author(s):  
Alexander Frankel
Keyword(s):  
Assortative Mating ◽  
Optimal Taxation ◽  
Married Couples ◽  
Tax Rates ◽  
Optimal Tax ◽  
Marginal Tax Rates ◽  
Multidimensional Screening

I present a simple and tractable model of the optimal taxation of married couples, working off of the multidimensional screening framework of Armstrong and Rochet (1999). In particular, I study how the tax code varies with the degree of assortative mating. One result is that the “negative jointness” of marginal tax rates found in Kleven, Kreiner, and Saez (2007, 2009) for couples with uncorrelated earnings should be attenuated in the presence of assortative mating. When mating is sufficiently assortative, the optimal tax schedule is separable: an individual's taxes do not depend on his or her spouse's income. (JEL D82, H21, H24, J12)

scholarly journals Nonlinear Tax Incidence and Optimal Taxation in General Equilibrium

Econometrica ◽  
2020 ◽  
Vol 88 (2) ◽  
pp. 469-493 ◽  
Author(s):  
Dominik Sachs ◽  
Aleh Tsyvinski ◽  
Nicolas Werquin
Keyword(s):  
General Equilibrium ◽  
Optimal Taxation ◽  
Income Taxes ◽  
Tax Incidence ◽  
Labor Income ◽  
Tax Rates ◽  
Tax System ◽  
Marginal Tax Rates ◽  
Optimal Taxes

We study the incidence of nonlinear labor income taxes in an economy with a continuum of endogenous wages. We derive in closed form the effects of reforming nonlinearly an arbitrary tax system, by showing that this problem can be formalized as an integral equation. Our tax incidence formulas are valid both when the underlying assignment of skills to tasks is fixed or endogenous. We show qualitatively and quantitatively that contrary to conventional wisdom, if the tax system is initially suboptimal and progressive, the general‐equilibrium “trickle‐down” forces may raise the benefits of increasing the marginal tax rates on high incomes. We finally derive a parsimonious characterization of optimal taxes.

scholarly journals Public Provision of Private Goods and Nondistortionary Marginal Tax Rates

2010 ◽  
Vol 2 (2) ◽  
pp. 1-27 ◽  
Author(s):  
Sören Blomquist ◽  
Vidar Christiansen ◽  
Luca Micheletto
Keyword(s):  
Income Tax ◽  
Optimal Taxation ◽  
Social Cost ◽  
Market Price ◽  
Efficiency Gain ◽  
Tax Rates ◽  
Public Provision ◽  
Private Goods ◽  
Marginal Tax Rates

Using an optimal taxation model combined with a previously neglected scheme of public provision of private goods, we show that there is an efficiency gain if public provision of selected goods replaces market purchases and that efficiency requires marginal income tax rates to be higher than if the goods were purchased in the market. Part of the marginal tax serves the same role as a market price and conveys information about a real social cost of working more hours. It might be that economies with higher marginal tax rates have less severe distortions than economies with lower marginal tax rates. (JEL H21, H42, I38)

scholarly journals Negative Marginal Tax Rates and Heterogeneity

2010 ◽  
Vol 100 (5) ◽  
pp. 2532-2547 ◽  
Author(s):  
Philippe Choné ◽  
Guy Laroque
Keyword(s):  
Income Distribution ◽  
Important Determinant ◽  
Opportunity Costs ◽  
Tax Rates ◽  
Numerical Illustration ◽  
Optimal Tax ◽  
Marginal Tax Rates ◽  
Work Opportunity

Heterogeneity is an important determinant of the shape of optimal tax schemes. This is shown here in a model à la Mirrlees. The agents differ in their productivities and opportunity costs of work, but their labor supplies depend only on a given unidimensional combination of these two characteristics. Conditions are provided under which marginal tax rates are everywhere nonnegative. This is the case when work opportunity costs are distributed independently of income. But one can also get negative marginal tax rates, in particular at the bottom of the income distribution. A numerical illustration is given, based on UK data. (JEL H21, H24, H31, J22)

scholarly journals Paternalism against Veblen: Optimal Taxation and Non-respected Preferences for Social Comparisons

2018 ◽  
Vol 10 (1) ◽  
pp. 39-76 ◽  
Author(s):  
Thomas Aronsson ◽  
Olof Johansson-Stenman
Keyword(s):  
Numerical Simulations ◽  
Income Tax ◽  
Optimal Taxation ◽  
Social Comparisons ◽  
Tax Policies ◽  
Tax Rates ◽  
Relative Consumption ◽  
Individual Preferences ◽  
Marginal Tax Rates

This paper compares optimal nonlinear income tax policies of welfarist and paternalist governments, where the latter does not respect individual preferences regarding relative consumption. Consistent with previous findings, relative consumption concerns typically induce a welfarist government to increase the marginal tax rates to internalize positional externalities. Remarkably, the optimal marginal tax rules are often very similar in the paternalist case, where such externalities are not taken into account. We identify several cases where the marginal tax rules are indeed identical between the governments. Numerical simulations show that marginal and average tax levels and the overall redistribution are often also similar. (JEL D62, D72, H21, H23, H24)

Optimal Income Taxation with Present Bias

2020 ◽  
Vol 12 (4) ◽  
pp. 298-327
Author(s):  
Benjamin B. Lockwood
Keyword(s):  
Income Tax ◽  
Tax Rates ◽  
Optimal Income Taxation ◽  
Earned Income ◽  
Present Bias ◽  
Optimal Tax ◽  
Multiple Dimensions ◽  
Low Incomes ◽  
Marginal Tax Rates ◽  
The Face

Work often entails up-front effort costs in exchange for delayed benefits, and mounting evidence documents present bias over effort in the face of such delays. This paper studies the implications for the optimal income tax. Optimal tax rates are computed for present-biased workers who choose multiple dimensions of labor effort, some of which occur prior to compensation. Present bias reduces optimal tax rates, with a larger effect when the elasticity of taxable income is high. Optimal marginal tax rates may be negative at low incomes, providing an alternative, corrective rationale for work subsidies like the Earned Income Tax Credit. (JEL D91, H21, H24)

Estimates of Effective Marginal Tax Rates on Factor Incomes

1981 ◽  
Vol 54 (2) ◽  
pp. 191 ◽  
Author(s):  
Douglas H. Joines
Keyword(s):  
Tax Rates ◽  
Marginal Tax Rates

EFFECTIVE MARGINAL TAX RATES UNDER THE FEDERAL INDIVIDUAL INCOME TAX: DEATH BY ONE THOUSAND PIN PRICKS?

1998 ◽  
Vol 51 (3) ◽  
pp. 553-564
Author(s):  
THOMAS A. BARTHOLD ◽  
THOMAS KOERNER ◽  
JOHN F. NAVRATIL
Keyword(s):  
Income Tax ◽  
Tax Rates ◽  
Individual Income ◽  
Marginal Tax Rates ◽  
Individual Income Tax
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