Economics Dictionary of ArgumentsHome
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| Income tax: Income tax is a levy imposed on individuals or entities by a government on their income. It is a major source of revenue for governments and is used to fund public services and infrastructure. Income tax rates vary depending on the jurisdiction and may be progressive, proportional, or flat. See also Income, Taxation._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Chris William Sanchirico on Income Tax - Dictionary of Arguments
Parisi I 326 Income tax/Labour Earnings Tax/Sanchirico: (…) critics have argued labor earnings taxation is itself subject to great policy uncertainty, and that no coherent argument has been, or perhaps could be, made that the problem is less severe for labor earnings taxation than for other distributional instruments (Sanchirico, 2011b, pp. 10–37)(1). The pure theory of optimal labor earnings taxation offers only the barest minimum by way of prescription (Mirrlees, 1976(2); Stiglitz, 1982(3), pp. 239–240; Slemrod, 1987(4)). Its sharpest useful prescription, arguably, is that the tax rate should lie somewhere between 0% and 100%. And even this relies on untenable assumptions regarding how individuals differ (Mirrlees, 1976(2), pp. 333, 341–344; Choné and Laroque, 2010(5), pp. 2532–2533; Judd and Su, 2006(6); Boadway et al., 2002(7); Bošković, 2008(8), pp. 13–14). Moreover, it applies only when - in somewhat conclusory fashion - the only taxes considered in the optimization problem are those on labor earnings (Mirrlees, 1976(2), pp. 333–340, 344–352; Nava, Schroyen, and Marchand, 1996)(9). Further, computer simulations of optimal tax models - which input empirically determined parameters into the theoretical model in an attempt to narrow down its outputted prescriptions - have not in fact been able to tighten the range of possibilities for optimal policy (Diamond, 1998(10), p. 84; Kanbur and Tuomala, 1994(11), p. 281; Myles, 2000(12), p. 114). This appears to have two causes. The first is the extreme dependence of such simulations on portions of the hypothesized theoretical model (such as the curvature of utility functions) that do not submit to empirically grounded parameterization. The second is the substantial width of the range of plausible values for parameters that do submit to empirical investigation. Regarding the latter, a case in point is the surprisingly wide spread of estimates for the after-tax price elasticity of work hours - the percentage change in work hours per percentage change in take-home hourly wage, an elemental parameter in optimal labor earnings tax design (Joint Comm. on Tax’n, 2003(13), pp. 15–16; Tuomala, 1990(14), p. 14; Ashenfelter, Doran, and Schaller, 2010(15), pp. 1–2; Blundell and MaCurdy, 1999(16), pp. 1684–1685; Evers, de Mooij, and van Vuuren, 2008(17), p. 26; Pencavel, 2002(18), p. 252). 1. Sanchirico, Chris William (2011b). “Optimal Tax Policy and the Symmetries of Ignorance.” Tax Law Review 66: 1–62. Web appendix available at 2. Mirrlees, James A. (1976). “Optimal Tax Theory: A Synthesis.” Journal of Public Economics 6: 327–358. 3. Stiglitz, Joseph (1982). “Self-Selection and Pareto Efficient Taxation.” Journal of Public Economics 17: 213–240. 4. Slemrod, Joel (1990). “Optimal Taxation and Optimal Tax Systems.” Journal of Economic Perspectives 4(1): 157–178. 5. Choné, Philippe and Guy Laroque (2010). “Negative Marginal Tax Rates and Heterogeneity.” American Economic Review 100: 2532–2547. 6. Judd, Kenneth L. and Che-Lin Su (2006). “Optimal Income Taxation with Multidimensional Taxpayer Types.” Working Paper No. 471. Society for Computational Economics, available available at 7. Boadway, Robin, Maurice Marchand, Pierre Pestieau, and Maria del Mar Racionero (2002). “Optimal Redistribution with Heterogeneous Preferences for Leisure.” Journal of Public Economic Theory 4: 475–498. 8. Bošković, Branko (2008). “Optimal Income Taxation with Heterogeneous Preferences.” (September 2, 2008). Manuscript, University of Toronto Department of Economics. 9. Nava, Mario, Fred Schroyen, and Maurice Marchand (1996). “Optimal Fiscal and Public Expenditure Policy in a Two-Class Economy.” Journal of Public Economics 61: 119–137. 10. Diamond, Peter A. (1998). “Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates.” American Economic Review 88: 83–95. 11. Kanbur, Ravi and Matti Tuomala (1994). “Inherent Inequality and the Optimal Graduation of Marginal Tax Rates.” Scandinavian Journal of Economics 96: 275–282. 12. Myles, Gareth D. (2000). “On the Optimal Marginal Rate of Income Tax.” Economics Letters 66: 113–119. 13. Joint Committee on Taxation (2003). 108th Cong., Overview of Work of the Staff of the Joint Committee on Taxation to Model the Macroeconomic Effects of Proposed Tax Legislation to Comply with House Rule XIII.3.(h)(2) (Comm. Print). 14. Tuomala, Matti (1990). Optimal Income Tax and Redistribution. New York: Oxford University Press. 15. Ashenfelter, Orley, Kirk Doran, and Bruce Schaller (2010). “A Shred of Credible Evidence on the Long-Run Elasticity of Labour Supply.” Economica 77: 637–650. 16. Blundell, Richard and Thomas MaCurdy (1999). “Labor Supply: A Review of Alternative Approaches,” in O. C. Ashenfelter and D. Card, eds., Handbook of Labor Economics 3A. Amsterdam: Elsevier, pp. 1559–1695. 17. Evers, Michiel, Ruud de Mooij, and Daniel van Vuuren (2008). “The Wage Elasticity of Labour Supply: A Synthesis of Empirical Estimates.” De Economist 156: 24–43. 18. Pencavel, John (2002). “A Cohort Analysis of the Association Between Work Hours and Wages Among Men.” Journal of Human Resources 37: 251–274. Chris William Sanchirico. “Optimal Redistributional Instruments in Law and Economics”. In: Parisi, Francesco (ed) (2017). The Oxford Handbook of Law and Economics. Vol 1: Methodology and Concepts. NY: Oxford University. >Taxation >Tax Avoidance, >Tax Competition, >Tax Compliance, >Tax Evasion, >Tax Havens, >Tax Incidence, >Tax Loopholes, >Tax System. _____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Sanchirico, Chris William Parisi I Francesco Parisi (Ed) The Oxford Handbook of Law and Economics: Volume 1: Methodology and Concepts New York 2017 |
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