Diamond, Peter and Spinnewijn, Johannes 
ORCID: 0000-0002-7963-5847
(2011)
Capital income taxes with heterogeneous discount rates.
American Economic Journal: Economic Policy, 3 (4).
pp. 52-76.
ISSN 1945-7731
Abstract
With heterogeneity in both skills and discount factors, the Atkinson- Stiglitz theorem that savings should not be taxed does not hold. In a model with heterogeneity of preferences at each earnings level, introducing a savings tax on high earners or a savings subsidy on low earners increases welfare, regardless of the correlation between ability and discount factor. Extending Emmanuel Saez (2002), a uniform savings tax increases welfare if that correlation is sufficiently high. Key for the results is that types who value future consumption less are more tempted by a lower paid job. Some optimal tax results and empirical evidence are presented.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.aeaweb.org/aej-policy/index.php |
| Additional Information: | © 2011 American Economic Association |
| Divisions: | Economics |
| Subjects: | H Social Sciences > HB Economic Theory |
| JEL classification: | D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Personal Finance H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency; Optimal Taxation H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies |
| Date Deposited: | 23 Feb 2012 15:00 |
| Last Modified: | 11 Dec 2024 23:59 |
| URI: | http://eprints.lse.ac.uk/id/eprint/42018 |
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