This paper develops a positive theory of overlapping income taxation in a federation of states. Its main motivation comes from the observation that in the U.S. states income tax rates are significantly lower than the federal income tax rate. The analysis shows that in a federal system total productivity dispersion between the states determines the federal tax rate. In fact, there exists a posit...

This paper derives optimal income tax formulas using compensated and uncompensated elasticities of earnings with respect to tax rates. A simple formula for the high income optimal tax rate is obtained as a function of these elasticities and the thickness of the top tail of the income distribution. In the general non-linear income tax problem, this method using elasticities shows precisely how t...

Can Progressive State Taxes Reduce Inequality? Andrew Leigh Economics Division Research School of Social Sciences Australian National University [email protected] www.andrewleigh.com October 2004 Can income taxes levied at a state or regional level affect the distribution of gross incomes? Or will workers merely move between regions, causing pre-tax wages to adjust? This question is relev...

In this paper, we present a micro estimate detennining taxable income as a function of gross income and all major deduction options depending on ho~sehold and asset categories. It is shown that tax savings strongly increase with ulcreasing income, resulting in a decreasing effective marginal tax rate for the highest income groups. We compute a lower bound on 1983 aggregate income tax losses' to...

The negative income tax represents one of the fundamental ideas of modern welfare policy. Based on a simple application of elementary price theory, it has a powerful lesson for work incentives in welfare programs. The academic literature on the negative income tax has raised two difficulties with it, one concerning work disincentives arising from an increase in the eligibility point, and the ot...

The negative income tax represents one of the fundamental ideas of modern welfare policy. Based on a simple application of elementary price theory, it has a powerful lesson for work incentives in welfare programs. The academic literature on the negative income tax has raised two difficulties with it, one concerning work disincentives arising from an increase in the eligibility point, and the ot...

Both the ratios of the labor remuneration and the residents’ income are too low in Chinese national income distribution. In order to resolve this prominent problem, the Chinese authority should attach great importance to the tax adjustment for realizing the positive effect of the distributive justice. Therefore, the objective of the Individual Income Tax reform is to strengthen its function on ...

The paper extends Atkinson’s measure of inequality to incorporate endogenous determination of incomes, with labour supplies responding to the tax system. On the basis of solutions for optimal income taxes using double limit analysis and derived from the social welfare function in this extension, the paper considers how the optimal income tax, transfers and inequality vary with the parameter use...

This paper quantitatively investigates the optimal capital income taxation in the general equilibrium overlapping generations model, which incorporates characteristics of housing and the U.S. preferential tax treatment for owner-occupied housing. Housing tax policy is found to have a substantial effect on how capital income should be taxed. Given the U.S. preferential tax treatment for owner-oc...