How Far Are We From The Slippery Slope? The Laffer Curve Revisited / Mathias Trabandt, Harald Uhlig.

Format:

Book

Author/Creator:

Trabandt, Mathias.

Contributor:

National Bureau of Economic Research.

Uhlig, Harald.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15343.

NBER working paper series no. w15343

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2009.

Summary:

We compare Laffer curves for labor and capital taxation for the US, the EU-14 and individual European countries, using a neoclassical growth model featuring "constant Frisch elasticity" (CFE) preferences. We provide new tax rate data. The US can increase tax revenues by 30% by raising labor taxes and by 6% by raising capital income taxes. For the EU-14 we obtain 8% and 1%. Dynamic scoring for the EU-14 shows that 54% of a labor tax cut and 79% of a capital tax cut are self-financing. The Laffer curve in consumption taxes does not have a peak. Endogenous growth and human capital accumulation locates the US and EU-14 close to the peak of the labor tax Laffer curve. We derive conditions under which household heterogeneity does not matter much for the results. By contrast, transition effects matter: a permanent surprise increase in capital taxes always raises tax revenues.

Notes:

Print version record

September 2009.