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“Robust Bounds on Optimal Tax Progressivity”

With the Lunch Seminar series, the Department of Finance is bringing eminent and up-and-coming researchers from around the world to Luxembourg.

Abstract

We study the problem of a robust planner who designs an optimal taxation scheme for a heterogeneous population in presence of uncertainty about the shape of the distribution of underlying types. Low-income workers are well insured under the optimal scheme, and so concerns about the left tail of the type distribution are negligible. On the other hand, the planner fears misspecification of the right tail of the type distribution emerging from budgetary concerns. Even when the tail of the distribution is Pareto, arbitrarily small misspecification concerns lead to zero marginal taxes at the top. A quantitatively calibrated model shows that a plausible degree of uncertainty leads to an optimal tax scheme with substantially reduced marginal tax rates for high-income earners and a peak marginal tax rate much lower than in the model without uncertainty

About the speaker

is an Associate Professor at NYU.

Language

English.

This is a free event. Registration is mandatory.

Cold lunches are provided to registered participants only.