Taxation and Excess Burden: A Life-Cycle Perspective
27 Pages Posted: 18 Aug 2004 Last revised: 30 Nov 2022
Date Written: June 1981
Abstract
A lifetime perspective is appropriate in assessing the welfare implications of government tax policies. Although a number of attempts have been made to ex- amine the excess burden of taxation in life-cycle models, these have tended to ignore the role of human capital accumulation and/or the leisure-income choice. In this paper, we do numerical simulations with a model that takes both of these phenomena into account. We find that under reasonable assumptions, the failure to take into account distortions of human capital decisions produces substantial underestimates of the excess burden of income taxation. In addition, allowing for the endogeneity of human capital increases the efficiency of a personal consumption tax relative to that of an equal yield income tax.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Taxation and the Intergenerational Transmission of Human Capital
-
On Taxation in a Two-Sector Endogenous Growth Model with Endogenous Labor Supply
-
How Do Taxes Affect Human Capital? The Role of Intergenerational Mobility
-
Welfare Improving Taxation on Savings in a Growth Model
By Xin Long and Alessandra Pelloni