This paper presents a model of optimal labor income taxation where top incomes respond to marginal tax rates through three channels: (1) standard labor supply, (2) tax avoidance, (3) compensation bargaining. We derive the optimal top tax rate formula as a function of the three corresponding...

We develop a theory of optimal unemployment insurance (UI) that accounts for workers’ job-search behavior and firms’ hiring behavior. The optimal replacement rate of UI is the conventional Baily [1978]-Chetty [2006a] rate, which solves the trade-off between insurance and job-search...

This paper analyzes the effects of top earnings tax rates on the international migration of football players in Europe. We construct a panel dataset of top earnings tax rates, football player careers, and club performances in the first leagues of 14 Western European countries since 1985. We...

This paper develops a realistic, tractable theoretical model that can be used to investigate socially-optimal capital taxation. We present a dynamic model of savings and bequests with heterogeneous random tastes for bequests to children and for wealth per se. We derive formulas for optimal tax...

This paper analyzes a randomized tax enforcement experiment in Denmark. In the base year, a stratified and representative sample of over 40,000 individual income tax filers was selected for the experiment. Half of the tax filers were randomly selected to be thoroughly audited, while the rest...

This paper provides a theoretical analysis of optimal minimum wage policy in a perfectly competitive labor market. We show that a binding minimum wage -- while leading to unemployment -- is nevertheless desirable if the government values redistribution toward low wage workers and if unemployment...

The individual income tax burden on dividends was lowered sharply in 2003 from a maximum rate of 35% to 15%, creating a unique opportunity to analyze the effects of dividend taxes on dividend payments by U.S. corporations. This paper uses data from the Center for Research in Security Prices...

This paper revisits the Atkinson-Stiglitz result on uselessness of commodity taxation in the presence of optimal non-linear income taxation in a more general setup, namely when tastes are heterogeneous. This general analysis displays the key economic assumptions under which the Atkinson-Stiglitz...

This paper investigates whether taxpayers bunch at the kink points of the US income tax schedule (i.e. where marginal rates jump) using tax returns data. Clear evidence of bunching is found only at the first kink point (where marginal rates jump from 0 to 15%). Evidence for other kink points is...

This paper characterizes the welfare gains from redistributive taxation and social insurance in an environment where the private sector provides partial insurance. We analyze stylized models in which adverse selection, pre-existing information, or imperfect optimization in private insurance...