Optimal Taxation with Multiple Dimensions of Heterogeneity
This paper develops a general theory of optimal income taxation with multiple dimensions of agent heterogeneity. The main technical hurdle in developing this theory is the possibility that individuals have multiple optimal incomes. Using a perturbation approach, optimal tax formulas are derived that account for the possibility that individuals have multiple optima and, hence, account for the possibility that individuals jump between their optimal income levels when the tax schedule is perturbed. The magnitude of these effects is quantified, thereby augmenting the optimal tax formulas from Saez (2001) with additional “jumping effect” terms. The paper provides a partial characterization of when individuals with multiple optimal incomes may exist under the optimal tax schedule. Finally, the paper derives a new methodology to simulate optimal income tax schedules with multidimensional heterogeneity. This method is implemented numerically, showing that individuals with multiple optimal income levels can exist under the optimal tax schedule.
Main Authors: | , |
---|---|
Format: | Working Paper biblioteca |
Language: | English |
Published: |
World Bank, Washington, DC
2021-03
|
Subjects: | OPTIMAL TAX, TAXATION, MARGINAL TAX RATE, TAX MODEL, LABOR SUPPLY, PRODUCTIVITY, |
Online Access: | http://documents.worldbank.org/curated/en/812041615228703353/Optimal-Taxation-with-Multiple-Dimensions-of-Heterogeneity https://hdl.handle.net/10986/35250 |
Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
id |
dig-okr-1098635250 |
---|---|
record_format |
koha |
spelling |
dig-okr-10986352502024-08-09T06:06:59Z Optimal Taxation with Multiple Dimensions of Heterogeneity Bergstrom, Katy Dodds, William OPTIMAL TAX TAXATION MARGINAL TAX RATE TAX MODEL LABOR SUPPLY PRODUCTIVITY This paper develops a general theory of optimal income taxation with multiple dimensions of agent heterogeneity. The main technical hurdle in developing this theory is the possibility that individuals have multiple optimal incomes. Using a perturbation approach, optimal tax formulas are derived that account for the possibility that individuals have multiple optima and, hence, account for the possibility that individuals jump between their optimal income levels when the tax schedule is perturbed. The magnitude of these effects is quantified, thereby augmenting the optimal tax formulas from Saez (2001) with additional “jumping effect” terms. The paper provides a partial characterization of when individuals with multiple optimal incomes may exist under the optimal tax schedule. Finally, the paper derives a new methodology to simulate optimal income tax schedules with multidimensional heterogeneity. This method is implemented numerically, showing that individuals with multiple optimal income levels can exist under the optimal tax schedule. 2021-03-11T14:58:34Z 2021-03-11T14:58:34Z 2021-03 Working Paper Document de travail Documento de trabajo http://documents.worldbank.org/curated/en/812041615228703353/Optimal-Taxation-with-Multiple-Dimensions-of-Heterogeneity https://hdl.handle.net/10986/35250 English Policy Research Working Paper;No. 9572 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank application/pdf text/plain World Bank, Washington, DC |
institution |
Banco Mundial |
collection |
DSpace |
country |
Estados Unidos |
countrycode |
US |
component |
Bibliográfico |
access |
En linea |
databasecode |
dig-okr |
tag |
biblioteca |
region |
America del Norte |
libraryname |
Biblioteca del Banco Mundial |
language |
English |
topic |
OPTIMAL TAX TAXATION MARGINAL TAX RATE TAX MODEL LABOR SUPPLY PRODUCTIVITY OPTIMAL TAX TAXATION MARGINAL TAX RATE TAX MODEL LABOR SUPPLY PRODUCTIVITY |
spellingShingle |
OPTIMAL TAX TAXATION MARGINAL TAX RATE TAX MODEL LABOR SUPPLY PRODUCTIVITY OPTIMAL TAX TAXATION MARGINAL TAX RATE TAX MODEL LABOR SUPPLY PRODUCTIVITY Bergstrom, Katy Dodds, William Optimal Taxation with Multiple Dimensions of Heterogeneity |
description |
This paper develops a general theory of
optimal income taxation with multiple dimensions of agent
heterogeneity. The main technical hurdle in developing this
theory is the possibility that individuals have multiple
optimal incomes. Using a perturbation approach, optimal tax
formulas are derived that account for the possibility that
individuals have multiple optima and, hence, account for the
possibility that individuals jump between their optimal
income levels when the tax schedule is perturbed. The
magnitude of these effects is quantified, thereby augmenting
the optimal tax formulas from Saez (2001) with additional
“jumping effect” terms. The paper provides a partial
characterization of when individuals with multiple optimal
incomes may exist under the optimal tax schedule. Finally,
the paper derives a new methodology to simulate optimal
income tax schedules with multidimensional heterogeneity.
This method is implemented numerically, showing that
individuals with multiple optimal income levels can exist
under the optimal tax schedule. |
format |
Working Paper |
topic_facet |
OPTIMAL TAX TAXATION MARGINAL TAX RATE TAX MODEL LABOR SUPPLY PRODUCTIVITY |
author |
Bergstrom, Katy Dodds, William |
author_facet |
Bergstrom, Katy Dodds, William |
author_sort |
Bergstrom, Katy |
title |
Optimal Taxation with Multiple Dimensions of Heterogeneity |
title_short |
Optimal Taxation with Multiple Dimensions of Heterogeneity |
title_full |
Optimal Taxation with Multiple Dimensions of Heterogeneity |
title_fullStr |
Optimal Taxation with Multiple Dimensions of Heterogeneity |
title_full_unstemmed |
Optimal Taxation with Multiple Dimensions of Heterogeneity |
title_sort |
optimal taxation with multiple dimensions of heterogeneity |
publisher |
World Bank, Washington, DC |
publishDate |
2021-03 |
url |
http://documents.worldbank.org/curated/en/812041615228703353/Optimal-Taxation-with-Multiple-Dimensions-of-Heterogeneity https://hdl.handle.net/10986/35250 |
work_keys_str_mv |
AT bergstromkaty optimaltaxationwithmultipledimensionsofheterogeneity AT doddswilliam optimaltaxationwithmultipledimensionsofheterogeneity |
_version_ |
1807157354325606400 |