We analyze the macroeconomic implications of increasing the top marginal income tax rate using a dynamic general equilibrium framework with heterogeneous agents and a fiscal structure resembling the actual US tax system. The wealth and income distributions generated by our model replicate the...

We analyze the macroeconomic implications of increasing the top marginal income tax rate using a dynamic general equilibrium framework with heterogeneous agents and a fiscal structure resembling the actual U.S. tax system. The wealth and income distributions generated by our model replicate the...

This paper computes optimal top marginal tax rates in Bewley-Aiyagari type economies that include entrepreneurs. Consistent with the data, entrepreneurs are over-represented at the top of the income distribution and are thus disproportionately affected by an increase in the top marginal income...