Data and Code for: High Marginal Tax Rates on the Top 1%? Lessons from a Life Cycle Model with Idiosyncratic Income Risk

Principal Investigator(s): View help for Principal Investigator(s) Dirk Krueger, University of Pennsylvania. Department of Economics; Fabian Kindermann, University of Regensburg. Department of Economics

Version: View help for Version V1

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Project Description

Summary: This paper argues that high marginal labor income tax rates on top earners are an effective tool for social insurance even when households have high labor supply elasticity, make dynamic savings decisions, and policies have general equilibrium effects. We construct a large scale overlapping generations model with uninsurable labor productivity risk, show that it has a realistic wealth distribution and numerically characterize the optimal top marginal rate. We find that marginal tax rates for top 1% earners of 79% are optimal as long as the model earnings and wealth distributions display a degree of concentration as observed in US data.

Scope of Project

Subject Terms: Progressive Taxation; Top 1%; Social Insurance; Income Inequality

JEL Classification:
      E62 Fiscal Policy
      H21 Taxation and Subsidies: Efficiency; Optimal Taxation
      H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes

Data Type(s): program source code

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Published Versions

V1 [2022-03-25]

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