TY - JOUR
T1 - Heterogeneity and Government revenues
T2 - Higher taxes at the top?
AU - Guner, Nezih
AU - Lopez-Daneri, Martin
AU - Ventura, Gustavo
PY - 2016/6/1
Y1 - 2016/6/1
N2 - How effective is a more progressive tax scheme in raising revenues? We answer this question in a life-cycle economy with heterogeneity across households and endogenous labor supply. Our findings show that a tilt of the U.S. income tax schedule towards high earners leads to small increases in revenue. Maximal revenue in the long run is only 6.8% higher than in our benchmark – about 0.8% of initial GDP – while revenues from all sources increase by just about 0.6%. Our conclusions are that policy recommendations of this sort are misguided if the aim is to exclusively raise government revenue.
AB - How effective is a more progressive tax scheme in raising revenues? We answer this question in a life-cycle economy with heterogeneity across households and endogenous labor supply. Our findings show that a tilt of the U.S. income tax schedule towards high earners leads to small increases in revenue. Maximal revenue in the long run is only 6.8% higher than in our benchmark – about 0.8% of initial GDP – while revenues from all sources increase by just about 0.6%. Our conclusions are that policy recommendations of this sort are misguided if the aim is to exclusively raise government revenue.
KW - Labor supply
KW - Progressivity
KW - Taxation
UR - http://www.scopus.com/inward/record.url?scp=84976320730&partnerID=8YFLogxK
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U2 - 10.1016/j.jmoneco.2016.05.002
DO - 10.1016/j.jmoneco.2016.05.002
M3 - Article
AN - SCOPUS:84976320730
VL - 80
SP - 69
EP - 85
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
SN - 0304-3932
ER -