How Far are We from the Slippery Slope? The Laffer Curve Revisited

59 Pages Posted: 22 Apr 2010

See all articles by Mathias Trabandt

Mathias Trabandt

Goethe University in Frankfurt

Harald Uhlig

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

Multiple version iconThere are 5 versions of this paper

Date Written: April 1, 2010

Abstract

We characterize the Laffer curves for labor taxation and capital income taxation quantitatively for the US, the EU-14 and individual European countries by comparing the balanced growth paths of a neoclassical growth model featuring "constant Frisch elasticity" (CFE) preferences. We derive properties of CFE preferences. We provide new tax rate data. For benchmark parameters, we find that the US can increase tax revenues by 30% by raising labor taxes and 6% by raising capital income taxes. For the EU-14 we obtain 8% and 1%. Denmark and Sweden are on the wrong side of the Laffer curve for capital income taxation.

Keywords: Laffer Curve, Incentives, Dynamic Scoring, US and EU-14 Economy

JEL Classification: E0, E60, H0

Suggested Citation

Trabandt, Mathias and Uhlig, Harald, How Far are We from the Slippery Slope? The Laffer Curve Revisited (April 1, 2010). ECB Working Paper No. 1174, Available at SSRN: https://ssrn.com/abstract=1585175 or http://dx.doi.org/10.2139/ssrn.1585175

Mathias Trabandt (Contact Author)

Goethe University in Frankfurt ( email )

Germany

Harald Uhlig

University of Chicago - Department of Economics ( email )

1101 East 58th Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
103
Abstract Views
1,780
Rank
65,096
PlumX Metrics