Abstract

https://ssrn.com/abstract=1418929
 
 

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Optimal Taxation in Theory and Practice


N. Gregory Mankiw


Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Matthew Weinzierl


Harvard Business School - Business, Government and the International Economy Unit

Danny Yagan


Harvard University - Department of Economics

June 2009

NBER Working Paper No. w15071

Abstract:     
We highlight and explain eight lessons from optimal tax theory and compare them to the last few decades of OECD tax policy. As recommended by theory, top marginal income tax rates have declined, marginal income tax schedules have flattened, redistribution has risen with income inequality, and commodity taxes are more uniform and are typically assessed on final goods. However, trends in capital taxation are mixed, and capital income tax rates remain well above the zero level recommended by theory. Moreover, some of theory's more subtle prescriptions, such as taxes that involve personal characteristics, asset-testing, and history-dependence, remain rare in practice. Where large gaps between theory and policy remain, the difficult question is whether policymakers need to learn more from theorists, or the other way around.

Number of Pages in PDF File: 35


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Date posted: June 16, 2009  

Suggested Citation

Mankiw, N. Gregory and Weinzierl, Matthew and Yagan, Danny, Optimal Taxation in Theory and Practice (June 2009). NBER Working Paper No. w15071. Available at SSRN: https://ssrn.com/abstract=1418929

Contact Information

N. Gregory Mankiw (Contact Author)
Harvard University - Department of Economics ( email )
Littauer Center
Room 223
Cambridge, MA 02138
United States
617-495-4301 (Phone)
617-495-7730 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Matthew Weinzierl
Harvard Business School - Business, Government and the International Economy Unit ( email )
Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Danny Yagan
Harvard University - Department of Economics ( email )
1875 Cambridge Street
Cambridge, MA 02138
United States
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