Poverty and savings optimal taxes with endogenous discount factors Pier - André Bouchard St. Amant and Louis Perrault
By: Bouchard St. Amant, Pier André
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Contributor(s): Perrault, Louis.
Material type: 
ArticlePublisher: 2019Subject(s): AHORRO | POBREZA | IMPUESTOS | REDISTRIBUCION | IMPOSICION OPTIMAOnline resources: Click here to access online
In:
Public Finance Review v. 47, n. 5, September 2019, p. 828-863Summary: Following recent developments linking poverty to present-bias behavior,
we conduct an optimal linear taxation analysis where some individuals
(called “behaviorals”) have a discount factor that is a function of their disposable
income. In the model, endogenous discount factors imply (1) that
taxing labor decreases the valuation of savings and (2) that subsidies on
savings mitigate for a lower weight being given to future consumption. We
perform simulations where the number of behavioral individuals increases
and find that resources raised through labor taxation are used to finance
saving subsidies rather than an increase of transfers. The prevalence of
behaviorals leads to an increase in the labor income tax rate.
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| Artículos | IEF | IEF | OP 581/2019/5-2 (Browse shelf) | Available | OP 581/2019/5-2 |
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Bibliografía.
Following recent developments linking poverty to present-bias behavior,
we conduct an optimal linear taxation analysis where some individuals
(called “behaviorals”) have a discount factor that is a function of their disposable
income. In the model, endogenous discount factors imply (1) that
taxing labor decreases the valuation of savings and (2) that subsidies on
savings mitigate for a lower weight being given to future consumption. We
perform simulations where the number of behavioral individuals increases
and find that resources raised through labor taxation are used to finance
saving subsidies rather than an increase of transfers. The prevalence of
behaviorals leads to an increase in the labor income tax rate.
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