Optimal Income Taxation with Unemployment and Wage Responses: A Sufficient Statistics Approach

2016 ◽  
Author(s):  
Kory Kroft ◽  
Kavan Kucko ◽  
Etienne Lehmann ◽  
Johannes F. Schmieder
Keyword(s):  
Income Taxation ◽  
Optimal Income Taxation ◽  
Sufficient Statistics

Optimal Income Taxation with Unemployment and Wage Responses: A Sufficient Statistics Approach

2020 ◽  
Vol 12 (1) ◽  
pp. 254-292 ◽  
Author(s):  
Kory Kroft ◽  
Kavan Kucko ◽  
Etienne Lehmann ◽  
Johannes Schmieder
Keyword(s):  
Income Tax ◽  
The United States ◽  
Income Taxation ◽  
Optimal Income Taxation ◽  
Sufficient Statistics ◽  
Earned Income ◽  
Tax Progressivity ◽  
Negative Income ◽  
Policy Variation ◽  
Negative Income Tax

We derive a sufficient statistics tax formula in a model that incorporates unemployment and endogenous wages to study the shape of the optimal income tax. Key sufficient statistics are the macro employment response to taxation, the micro and macro participation response to taxation, and the wage-moderating effect of tax progressivity. We empirically implement the tax formula by estimating the micro and macro elasticities using policy variation from the United States. Our results suggest that the optimal tax more closely resembles a negative income tax than an earned income tax credit relative to the case where unemployment and wage responses are ignored. (JEL E24, H21, H23, H24, H31, J22, J31)

scholarly journals Optimal Income Taxation: Mirrlees Meets Ramsey

2021 ◽  
Author(s):  
Jonathan Heathcote ◽  
Hitoshi Tsujiyama
Keyword(s):  
Income Taxation ◽  
Optimal Income Taxation

Optimal Income Taxation with Risky Earnings: A Synthesis

2015 ◽  
Vol 17 (6) ◽  
pp. 773-801 ◽  
Author(s):  
ROBIN BOADWAY ◽  
MOTOHIRO SATO
Keyword(s):  
Income Taxation ◽  
Optimal Income Taxation
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