Research Abstracts Online
January 2009 - March 2010
University of Minnesota Twin Cities
College of Liberal Arts
Department of Economics
PI: Christopher J. Phelan
Quantifying the Welfare Gains From Sophisticated Income and Wealth Taxation
Recent theoretical research on dynamic optimal taxation has uncovered the existence of potential social gains from employing tax systems that are sophisticated in a number of ways, featuring at least some combination of non-linearities, history dependence, and non-trivial interactions between labor and capital income taxes. The aim of this research is to quantify how large these gains are likely to be using a large-scale overlapping generations model calibrated to match salient features of U.S. data.
The computations we have performed so far using MSI resources suggest that the gains are indeed very large. During the next period, the researchers plan to conduct a more thorough investigation of where these gains come from, in particular which feature(s) of tax systems are most responsible for the gains they have found.
Kenichi Fukushima, Graduate Student