Taxation Over Time

65 Pages Posted: 6 Apr 2006

See all articles by Lee Anne Fennell

Lee Anne Fennell

University of Chicago - Law School

Kirk J. Stark

University of California, Los Angeles (UCLA) - School of Law


Individuals experience lengthy taxpaying lives that exhibit a great deal of internal variation in income, yet tax rate schedules usually ignore the taxpayer's age, life cycle stage, and pattern of earnings over time. What would it mean for tax design to optimally contextualize taxation within taxpayers' lives - that is, to approach the taxation of individuals explicitly as taxation over time? This article offers what we believe to be the first comprehensive theoretical treatment of that question. The fact that people occupy different income positions at different times in their lives has profound implications for a tax system's pursuit of equity and efficiency. Features of human cognition that operate over time, such as optimism, myopia, and a preference for improving sequences, also bear importantly on tax design. To shed light on these issues, we synthesize and contrast two divergent approaches to taxpayer lives - well-known lifetime averaging proposals that attempt to erase the impact of income volatility on relative tax burdens, and less-studied age-basing proposals that attempt to harness population-wide variations in lifetime earning patterns by keying tax rates explicitly to age. Our goal is to provide a unified analytic framework for understanding taxation over time that will spur further empirical and theoretical work on this intriguing issue.

Keywords: Tax policy, economics, cognitive psychology, life-cycle hypothesis

JEL Classification: E2, H2, H21, H24, H31

Suggested Citation

Fennell, Lee Anne and Stark, Kirk J., Taxation Over Time. Tax Law Review, Vol. 59, No. 1, 2005, UCLA School of Law, Law-Econ Research Paper No. 05-24, U Illinois Law & Economics Research Paper No. LE05-024, Yale Law & Economics Research Paper No. 319, Available at SSRN:

Lee Anne Fennell

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States
773-702-0603 (Phone)

Kirk J. Stark (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States
310-825-7470 (Phone)

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