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Research Abstracts Online
January 2010 - March 2011

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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 the researchers have performed so far using MSI resources suggest that the gains are indeed very large. In current research, they are conducting 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.

Group Member

Kenichi Fukushima, Graduate Student