Transcription of Optimal Income Taxation: Mirrlees Meets Ramsey
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Optimal Income Taxation: Mirrlees Meets Ramsey
Optimal Income taxation : Mirrlees Meets Ramsey . Jonathan Heathcote Hitoshi Tsujiyama . Minneapolis Fed and CEPR Goethe University Frankfurt August 22, 2017. Abstract What is the Optimal shape of the Income tax schedule? This paper compares the Optimal ( Mirrlees ) tax and transfer policy to various simple parametric ( Ramsey ) alternatives. The environment features distinct roles for public and private insurance. In our baseline calibration to the United States, Optimal marginal tax rates increase in Income , and can be well approximated by a simple two-parameter function. The shape of the Optimal schedule is sensitive to the amount of fiscal pressure the government faces to raise revenue. As fiscal pressure increases, the Optimal schedule becomes first flatter, and then U-shaped, reconciling various findings in the literature.
Optimal Income Taxation: Mirrlees Meets Ramsey Jonathan Heathcotey Minneapolis Fed and CEPR Hitoshi Tsujiyamaz Goethe University Frankfurt August 22, 2017
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