Questions tagged [optimal-taxation]
The optimal-taxation tag has no usage guidance.
43 questions
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Difficulty understanding steps in optimal taxation derivations
I am replicating the derivations from the paper Environmental policy, public finance and the labour market in a second-best world (Bovenberg & van der Ploeg, Journal of Public Economics, 1994), ...
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Effects of an anti-trust tax
Suppose a corporate tax.
It is levied on publicly traded companies.
It is calculated as a percentage of the market capitalization of the company.
The market capitalization in question is the average ...
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Heuristics for the government revenue maximization problem
I suppose it is an established fact that increasing tax rates yields diminishing returns for government revenue.
From what I could gather, it is still an open question about the optimum point, though.
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Is it possible to abolish regressive taxes?
Is it possible for an economy and government to function without regressive taxes?
I believe this could severely restrict the tax base, but I am not sure if there could still be enough diversity ...
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References on another tax design
Suppose an inheritance cap of 1/3 per heir.
A rich couple would have its wealth divided at least by three at every death, at most multiplied by two at every marriage, and so on, therefore there would ...
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References on a tax design
Suppose a corporate tax.
It is levied on publicly companies.
It is calculated as a percentage of the market capitalization of the company.
The market capitalization in question is the average annual ...
user49571
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Does a Homothetic Function with Respect to Consumption and Hours Worked Satisfy Certain Conditions in Fiscal Policy Models?
Proposition 3: If the utility function is homothetic with respect to consumption and hours worked, then the steady-state capital tax is zero.
Proof: This class of preference satisfies:
\begin{equation}...
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If land value taxes should be estimated at highest and best use, wouldn't that mean that planning/zoning gain would not be captured?
According to Dwyer (2014), a land value tax should be based on the highest and best use. I interpret this as not taking into account the permissible use, meaning that people owning land in a zone that ...
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Net effect of govt spending and tax cuts
Let's say a government comes out with a new budget. This budget decreases income taxes in a more or less neutral way (neither progressive or regressive). However they also decrease government spending ...
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Reference books that treat retirement savings/pension systems
I'm looking for references (preferably, although not limited to, books) that treat the topic of pension/retirement savings systems academically, in particular I'm interested in getting introduced to ...
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A tax-to-GDP ratio of 100% or more
Is it possible that a country's tax-to-GDP ratio reaches 100% or more, let's say with a land value tax. And what would it imply? That all incomes would be spent on paying taxes?
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Ramsey Optimal Tax
Suppose there are $n$ goods ($x_i$ with prices $p_i$) to be taxed with a sequence of ad valorem taxes whose rates are given by $t_i$. The total tax revenue is $T = \sum_{i=1}^{n} t_ip_ix_i$. For a ...
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Set of implementable allocations (Overlapping Generations Models)
My question is from overlapping generations
$\Rightarrow$ I want to prove this part of the theorem
$\textbf{First}$ proceed by showing that the allocations in
a competitive equilibrium must satisfy(...
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Is there a consensus about the relationsship between tax rate and tax revenue?
I have been looking at these charts by the Mercator think tank which describe tax revenue and tax rate as percentage of GDP for the United States.
Mercator think tank
Is there a consensus about the ...
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Deadweight loss of lump-sum tax
I was reading derivations of Ramsey's Optimal Tax Formula, and noticed the claim that a lump-sum tax eliminates dead weight loss. I see this claim made in multiple sources, such as the Wikipedia ...
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How does intertemporal substitution affect the equivalence between cap-and-trade and carbon taxes?
It is often stated that, with perfect information and neglecting administrative burdens, the following two policies are economically equivalent:
a carbon tax of $T$ that results in a equilibrium ...
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Laffer curve and Pareto-efficiency
Can setting the income tax rate above the revenue-maximizing tax rate (Laffer rate) lead to a Pareto-efficient allocation?
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Necessary conditions in overlapping generations model (OLG)
The consumer at each period maximizes
\begin{equation}
\displaystyle\sum_{i=1}^{I}\beta^{i-1}U(c^i_{t+i},l^i_{t+i}) , t=0,1,2,3,...
\end{equation}
subject to
\begin{equation}
(1+\eta_t)c^{i}_t+...
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Relationship between taxation, national debt, and pool of private investment money
We've all heard the argument that an increase in taxation of the wealthy, or of investment earnings in particular (capital gains + dividends) will discourage investment and hurt the overall economy. ...
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Does Progressive Taxation Actually Follow The Decreasing Marginal Value of Wealth?
From my understanding, the application of a progressive income tax (increasing rate based on income level) follows from the assumptions of: "Equal Sacrifice" - everyone's "sacrifice&...
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Are returns from secondary capital market funds (stocks and bonds) a form of unearned income?
If I own a bunch of market funds which hold securities from secondary capital markets (stock and bond markets), am I partaking in unearned income/economic rent?
Let me clarify what I my question is ...
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Maximized tax revenue & foreign labor
I'm dealing with a tricky assignment, and I have no idea of where to begin.
Person 1 lives in Denmark and has a utility function given by,
$$(1) \ \ u(c,l)=c-\frac{\eta}{\eta+1}(24-l)^{\frac{\eta+1}{\...
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Revenue maximization problem
There are $N>0$ Households in an economy.
The government has aim to maximize a weighted average of income by imposing tax on the rich people and redistribute the tax revenue to the labor ones.
...
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Why tax investment?
I assume that investing is more useful than consuming for society as a whole, at least in the long run. But then why isn't the government taxing consumption more and investment less? This would create ...
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Optimal Top Marginal Tax Rates
Some of you might know of US politician Alexandria Ocasio-Cortez, a member of the Democratic Party as well as the Democratic Socialists of America. In a recent interview she had on 60 Minutes, she ...
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A utility function that gives a regressive tax rate [closed]
I see some discussion that the reasoning for the construction of a tax rate function is the utility function. Whould $u=\ln\ln w$ function where $u$ is the utility and $w$ the wealth give a regressive ...
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Would taxing money owned (as a share of purchasing power) be a better form of taxation?
Consider a nation whose money is entirely digital (like Bitcoin), but centralized (unlike Bitcoin). Furthermore, the total money supply is fixed, i.e. money cannot be created nor destroyed. To be ...
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Why do higher real interest rates increase land value?
I'm using this equation to calculate market value of land based on the levied land value tax:
y = market land value
x = land value tax
r = real interest rate
a = real time-independent land value
i = ...
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Why can't the Land-Value Tax (in some cases) be passed on to tenants?
According to https://en.wikipedia.org/wiki/Land_value_tax:
Because the supply of land is essentially fixed, land rents depend on what tenants are prepared to pay,
That doesn't make any sense. If ...
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Aggregating in a Continuum
I am working with the following Economic model of labour and consumption decisions:
I have a population whose mass is normalized to one of consumers.
They derive utility from consumption $c$,...
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What at all justifies income taxes (as opposed to sales taxes only)?
For those who do not know, in America, the higher your income, the higher the percent of it is spent on taxes. This means that, whatever tax money is used for, those who are more hardworking (or, at ...
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Should housing be considered a form of capital for the purpose of capital gains taxation?
Economists across the political spectrum almost unanimously oppose the home mortgage interest tax deduction. While I'm sure there are a few whom I've missed, I could only find a single professional ...
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Private and Social Optimum with externality in this example
Firstly, I wanted to know if we may be consider as an externality, a situation such that a customer A bought a bike to a seller B, not properly checked - and which may provoke some accidents.
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Paternalistic Government policies
A consumer with income $m$ has preferences $U(x , y) = x^a y^{1-a} $ where a is between 0 and 1. A paternalistic Government wants to regulate the choices of the consumer to maximize it's own welfare ...
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The effect of structural unemployment on revenue from value added tax
Bill Gates and European countries have shown favor for consumption/VAT taxes. The arguments given by proponents are often something along the lines that "we know how to tax certain items more than ...
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Is corporate tax an argument in equal income tax (from labour and capital) debate and does the return on capital depend on rate of the corporate tax?
In our country we have 25% personal income tax on labour, 15% corporate tax on corporations and 10% personal income tax on income from capital (e.g. dividends). Pundits in our country are saying that ...
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The United States' position on the Laffer Curve
According to a 2012 IGM panel (cf. reference below), most experts believe that a federal income tax cut would lead to a higher GDP in five years, ceteris paribus. Is this effect purely Keynesian, and ...
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What would be the economic impact of the "fair tax" plan?
So I read about an interesting proposal about completely replacing income tax with a heavy national sales tax of about 30% (23% inclusive to compare to income tax).
I was thinking about what the ...
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Why are there estate taxes after the owner passes away?
Isn't it unfair for estates to be taxed after death? The person who bequeathed the estate probably purchased it with after tax money, so wouldn't it then be taxed twice? What is the purpose of the tax ...
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Difference-in-Differences on State Sales Tax Rates
In an attempt to evaluate a potential U.S. National Sales tax rate, it was suggested on this forum before that I consider a difference-in-differences on state sales tax rates before and after they ...
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Derivation on p.99 of Salanie, The Economics of Taxation (2nd edition)
Starting on p. 98 of Salanie's "The Economic of Taxation" (2nd edition), it explains
To probe it more rigorously, let us define the utility of taxpayer $w$ when he claims to have productivity $w'$:
...
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Equality, Taxes & Business Growth
First, I'm not an economist - just a regular Joe interested in a small part of the subject.
Second, I apologize if this is a better question for the 'politics' stack exchange, but I figured I might ...
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Simple Sketch of Mirrlees 1971
Mirrlees' 1971 paper (An Exploration in the Theory of Optimum Income Taxation) on optimal taxation can sometimes be hard to follow. Does anybody know of (or could even provide here) a simple sketch of ...
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