This paper estimates intertemporal labor supply responses to two-year long income tax holidays staggered across Swiss cantons. Cantons shifted from an system based on the previous two years’ a standard annual pay as you earn system, leaving years of untaxed. We find significant but quantitatively very small wage earnings with elasticity 0.025 overall. High earners and especially self-employed d...

The Earned Income Tax Credit distributes more than $60 billion to over 20 million low-income families annually. Nevertheless, an estimated one-fifth of eligible households do not claim it. We ran six preregistered, large-scale field experiments with 1 observations test whether “nudges” could increase EITC take-up. Despite varying the content, design, messenger, and mode our messages, we find no...

It has been shown that higher capital taxes can have a growth-enhancing effect when combined with a revenue-compensating cut in wage taxes (Uhlig and Yanagawa 1996; European Economic Review 40, 1521–1540) or with an expansion in productivity-increasing public services (Rivas 2003; European Economic Review 47, 477–503). The present paper demonstrates that these results critically hinge on the ex...

The increasing international mobility of high-skill individuals is often seen as posing a threat to domestic social welfare, by limiting the ability of governments to tax these individuals and redistribute to the poor. In this note, we examine a simple dynamic nonlinear income tax model without commitment. In this setting, it is shown that the threat of emigration by high-skill individuals faci...

European economies are characterized by unionized labor markets and a pronounced governmental redistribution of income. This paper studies a model where those two features are combined with the possibility for individuals to make charitable contributions to the poor. The model exhibits equilibrium unemployment that increases with the degree of altruism. It is shown that a more progressive incom...

Inherited wealth creates a second distinguishing characteristic of individuals, in addition to earning abilities. We incorporate this fact into a model of optimal labor income taxation, with bequests motivated by joy of giving. We …nd that taxes on bequests or on inheritances allow further redistribution, if in the parent generation initial wealth and earning abilities are positively related. O...

Disposable income inequality, as measured by the Gini coefficient and using the Family Budget Survey data, increased very little, and by a similar amount, from 1989 to 1993 in the Czech Republic and Slovakia. This surprising result is examined with an analysis of changes in the channels of redistribution and a Gini decomposition. We find that the sizeable increase in overall inequality due to c...

We explore how immigrant legal status affects safety net transfers using variation from the Immigration Reform and Control Act of 1986 (IRCA), which authorized the largest U.S. amnesty to date. Exploiting the timing and geographic unevenness in intensity of IRCA’s legalization programs, we estimate a sizable effect of permanent residency on Earned Income Tax Credit (EITC) transfers. By contrast...

Conventional models of equilibrium unemployment typically imply that proportional taxes on labor earnings are neutral with respect to unemployment as long as the tax does not affect the replacement rate provided by unemployment insurance, i.e., unemployment benefits relative to after-tax earnings. When home production is an option, the conventional results may no longer hold. This paper uses a ...