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...

A neglected implication of the choice of the tax unit is its impact on the consumption risk carried by taxpayers. As compared to individual taxation, joint taxation with income splitting provides couples with more insurance against the risk of earning inability for one of the spouses. If that...

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...

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...

We apply theories of capital-market failure to analyze optimal financing of risky higher education. In the market solution, students can only finance theireducation through debt. There is underinvestment in human capital because some students with socially profitable investments in human capital...

This paper provides an efficiency argument in favor of progressive labor income taxation. When the consumer faces a trade-off between investments in financial and human capital, a proportional comprehensive income tax tends to discriminate in favor of human capital investments. This effect is...

This paper studies the effects of agent heterogeneity on optimal capital income taxation. We discuss conditions for the optimality of zero capital income taxes in a multiperiod model with heterogeneous agents and explicitly derive the welfare effects of taxation depending on the distribution of...