Marginal Tax Rates and Income Inequality in a Life-Cycle Model
AbstractIn this paper we study the quantitative impact of marginal tax rates on the distribution of income. Our methodology builds on computable general-equilibrium framework. We find that distortions from marginal tax rate changes of the sort implied by the Tax Reform Act of 1986 have sizable effects on income inequality in a reasonably quantified life-cycle setting: In our model rate changes alone capture half the increase in the pretax Gini that actually occurred between 1984 and 1989.
CitationAltig, David, and Charles T. Carlstrom. 1999. "Marginal Tax Rates and Income Inequality in a Life-Cycle Model." American Economic Review, 89 (5): 1197-1215. DOI: 10.1257/aer.89.5.1197
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H31 Fiscal Policies and Behavior of Economic Agents: Household
- D31 Personal Income, Wealth, and Their Distributions