Optimal Top Marginal Tax Rates Under Income Splitting for Couples
26 Pages Posted: 16 Jun 2011
Date Written: June 2011
Abstract
This paper analytically derives optimal top marginal tax rates when couples are taxed according to income splitting between spouses, consumption is taxed, and the skill distribution is unbounded. Optimal top marginal income tax rates are then quantified for Germany. Estimation results based on an exhaustive dataset of top taxpayers suggest that the optimal asymptotic tax rate is close to 2/3 and only applies to incomes that are considerably higher than those currently subject to the actual top tax rate.
Keywords: optimal income tax, top incomes
JEL Classification: D31, D72, H23
Suggested Citation: Suggested Citation
CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Poschinger Str. 5
Munich, DE-81679
Germany
HOME PAGE: http://www.CESifo.de
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany