A model is presented for simulating the level of taxes imposed on highly skilled labor. The effective average tax rate, defined as the relative wedge between employment costs and disposable income, is computed. Income and payroll taxes and social security contributions not yielding an equivalent...

Individuals in most all countries face a wide range of direct taxes on their income, especially variants of the individual income tax and payroll taxes. For the income tax, attempts are often made to reduce the compliance and administrative costs of the tax by using presumptive, or simplified,...

Generational Accounting is only a shortcut to a general equilibrium analysis because it is assumed that individual decisions are unaffected by policy reforms. Nonetheless only two studies examine the accuracy of Generational Accounting, but Fehr and Kotlikoff (1996) consider changes in...

In a two-period model with uncertainty about life expectancy, we analyze several measures that are typically included in a social security reform: tax incentives for private life annuities, a cut in the social security benefits, and an increase in the social security tax. First, we look at the...

It is well known that consumption-tax systems have several advantages over existing income-tax systems, such as greater administrative simplicity and intertemporal neutrality. Despite these advantages, proposals to introduce consumption taxes have only had very limited success. This paper...

Assuming that higher traveling expenses reduce traveling time, this paper considers tax deductibility of commuting expenses when a distorting wage tax is levied. While the decision on commuting expenses would not be distorted if traveling costs were completely deductible, taxation would still...

This contribution investigates the justifiable spread between labor and capital income tax rates under a dual income tax, based on arguments put forth in Nielsen and Sørensen (1997). An efficient generalized instrumental variables estimator proposed by Hausman and Taylor (1981) is employed in a...

The present paper quantifies the economic consequences of eliminating the system of income splitting in Germany. We apply a dynamic simulation model with overlapping generations where single and married agents decide on labor supply and homework under income and life-span risk. We compute...

I demonstrate how the discrete model of optimum income taxation can be used to derive the structure of optimal income tax rates. I compare simulations of the discrete and continuous models of optimum income taxation under identical circumstances, based on U.S. wage data. The two models produce...

This paper analyzes the influence of capital gains taxation on the decision to realize capital gains and losses when gains are tax-exempt after a certain holding period. Theory predicts that high marginal tax rates incentivize investors to realize taxable losses. In contrast, the propensity to...