Optimal income taxation with labor supply responses at two margins: When is an Earned Income Tax Credit optimal? q

• 成果类型: Article
• 署名作者: Hansen, Emanuel
• 署名单位: University of Cologne
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2021.104365
• 发表日期: 2021
• 关键词: Optimal income taxation; Extensive margin; Intensive margin; Earned Income Tax Credit

摘要

This paper studies optimal non-linear income taxation in a model with labor supply responses at the intensive (hours, effort) and extensive (participation) margins. It shows that an Earned Income Tax Credit (EITC) with negative marginal taxes and negative participation taxes at the bottom is optimal if, first, semi-elasticities of participation are decreasing along the income distribution and, second, social concerns for redistribution from the poor to the very poor are sufficiently weak. This result is driven by a previously neglected trade-off between distortions at the intensive margin and distortions at the extensive margin, i.e., between two aspects of efficiency. Numerical simulations suggest that a strong expansion of the EITC for childless singles in the US could be welfare-increasing. (c) 2021 Elsevier B.V. All rights reserved.