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Tax Lecture

Tax Lecture

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Published by kll93

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Published by: kll93 on Aug 30, 2011
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Does not work as a system DAOES NOT ACHIEVE PROGRESSIVITY EFFICIENCY vat zero and reduced rating a poor

way to redistribute, and taxes and benefits damage work incentive more than necessary Distortions? A mass of different tax rates on carbon and failure to price congestion efficiently Equity issues Current proposals: Treat the system as a whole Less aggressive means testing Move towards neutrality - Widening the VAT base - Not taxing the normal return to capital Whilst proposing sensible deviations from neutrality Achieve progressivity through the direct tax and benefit system Where should the taxes be best targeted at? How do we measure effective tax rates? The importance of information, complexity and salience Evidence on the size of reform Implications for tax design

He is looking at taxation of earnings, with some discussion of indirect taxation and the taxation of savings. Taxes reduce labour supply substitution effects are generally larger than income effects And especially for low earners responses are larger at the extensive margin employment than at the intensive margin hoursof work A large extensive elasticity can turn around the impact of declining social weights (Saez, Laroque) Implying a higher transfer to low wage workers than those out of work A role for earned income tax credits negative tax rate (contradicts a Nobe prize winner s work, but if extensive elasticity > intensive elasticity the argument turns around)

Participation tax rates at the bottom trmian very high in UK Marginal tax rates in the UK are well over 80% for low income working families

what should the tax rate on the top income bracket be. E taxable income elasticity T = 1 / (1+ae) Where a is the Pareto parameter Current indirect taxation is a poor way of delivering redistribution given the other tax instruments available implement reform package that achieves compensation while also avoiding significant damage to work incentives .Should we want to maximize the revenue collected.

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