Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities
Published in American Economic Journal Economic Policy • Jan 29, 2014
Authors:,,
Thomas Piketty
Emmanuel Saez
Stefanie Stantcheva
Abstract
This paper derives optimal top tax rate formulas in a model where top earners respond to taxes through three channels: labor supply, tax avoidance, and compensation bargaining. The optimal top tax rate increases when there are zero-sum compensation-bargaining effects. We present empirical evidence c...