Health Risk, Insurance, and Optimal Progressive Income Taxation

• 成果类型: Article
• 署名作者: Jung, Juergen; Tran, Chung
• 署名单位: University System of Maryland; Towson University; Australian National University
• 刊物名称: JOURNAL OF THE EUROPEAN ECONOMIC ASSOCIATION
• ISSN/ISSBN: 1542-4766
• DOI: 10.1093/jeea/jvad010
• 发表日期: 2023
• 页码: 2043-2097
• 关键词: social-security; disability insurance; education subsidies; tax progressivity; POLICY; redistribution; Heterogeneity; DYNAMICS; ECONOMY; demand

摘要

We study the optimal progressivity of personal income taxes in a general equilibrium overlapping generations model where individuals are exposed to idiosyncratic shocks to labor productivity and health status over the lifecycle. Our results-based on a calibration to the US economy-indicate that both, the presence of health risk and the available insurance institutions, have a strong effect on the optimal level of tax progressivity. Given the fragmented and non-universal health insurance system in the US, a welfare maximizing income tax system is substantially more progressive than the current US income tax. The higher progressivity provides additional redistribution and social insurance, especially for unhealthy low income individuals who have limited access to health insurance. When exposure to health risk is removed or reduced by introducing more comprehensive health insurance systems, we observe large decreases in the optimal level of income tax progressivity, and the optimal tax system resembles findings from the previous literature. These findings highlight the importance of accounting for the unique characteristics of health risk and the design of the health insurance system when characterizing optimal income taxes.