Following Mirrlees (1971) and Vickrey (1945), the optimal tax literature has studied the design of a personal income tax where the ideal would be to tax unobserved earnings ability but instead the only available information is actual earnings. In practice, though, taxes depend on a broader range of information about each individual than earnings. In principle, this supplementary information can...

PURPOSE This study compared the official poverty rate for adults aged 65 years and older with alternative measures that portray the true resources and needs of older adults. DESIGN AND METHODS The analysis used data from the 2004 Health and Retirement Study on income, assets, in-kind transfers, and out-of-pocket medical expenses. It also incorporated the effects of federal and state income ta...

This paper examines the evolution of the corporate profit base and the relationship between book income and tax income for U.S. corporations over last two decades. The paper demonstrates that this relationship has broken down over the 1990s and has broken down in a manner that is consistent with increased sheltering activity. The paper traces the growing discrepancy between book and tax income ...

In simple economic models, it is relatively easy to describe how to impose a value-added tax at a uniform rate on all consumption goods, and to demonstrate that this tax is equivalent to a proportional labor income tax, plus a tax on existing assets. The equivalence involves little more than the national income identity relating the sources and uses of income. Once one attempts to incorporate t...

This note presents a simple, partial equilibrium model of the supply of offshore tax havens, when multinationals are capable of sheltering some of their worldwide income. It provides a few contrasting predictions to those in “Tax Competition with Parasitic Tax Havens” by Slemrod and Wilson. Slemrod and Wilson model tax sheltering as a production process which uses up scarce resources in the tax...

This paper reassesses the burden of the current U.S. international tax regime and reconsiders well-known welfare benchmarks used to guide international tax reform. Reinventing corporate tax policy requires that international considerations be placed front and center in the debate on how to tax corporate income. A simple framework for assessing current rules suggests a U.S. tax burden on foreign...

81 National Tax Journal Vol. LXI, No. 1 March 2008 Abstract Do income taxes levied at a state or regional level affect the after–tax distribution of income? Or do workers merely move between regions, causing pre–tax wages to adjust? Using the full income tax parameters for all U.S. states from 1977–2002, I create a “simulated tax redistribution index” that captures the mechanical impact of chan...

Consider the problem of a benevolent government that needs to finance the provision of a public good with distortionary taxes and cannot commit to policies beyond the current period. In such a case, public expenditure is inefficiently low. If the government further loses the ability to set tax rates before production in the period takes place, then it will not internalize how its policy choices...

This paper examines whether a principal with limited knowledge of agents’ actions can use an income tax scheme to uniquely implement the Pareto optimal equilibrium in a coordination game (i.e. a game with multiple Pareto-ranked equilibria). We show that, in contrast to games with externalities but a unique equilibrium, implementation in coordination games fails generically unless the identity o...