Taxing Top CEO Incomes

We use a firm-CEO assignment framework to model the market for CEO effective labor. In the model’s equilibrium, more talented CEOs match with and supply more effort to larger firms. Taxation of CEO incomes affects the equilibrium pricing of CEO effective labor and, hence, spills over and affects firm profits. Absent the ability to tax profits or a direct concern for firm owners, a standard prescription for high marginal income taxes emerges. However, given such an ability or concern, the optimal marginal tax rates are much lower. (JEL D31, H21, M12)

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Nonlinear Tax Incidence and Optimal Taxation in General Equilibrium

Econometrica ◽

10.3982/ecta14681 ◽

2020 ◽

Vol 88 (2) ◽

pp. 469-493 ◽

Cited By ~ 4

Author(s):

Dominik Sachs ◽

Aleh Tsyvinski ◽

Nicolas Werquin

Keyword(s):

General Equilibrium ◽

Optimal Taxation ◽

Income Taxes ◽

Tax Incidence ◽

Labor Income ◽

Tax Rates ◽

Tax System ◽

Marginal Tax Rates ◽

Optimal Taxes

We study the incidence of nonlinear labor income taxes in an economy with a continuum of endogenous wages. We derive in closed form the effects of reforming nonlinearly an arbitrary tax system, by showing that this problem can be formalized as an integral equation. Our tax incidence formulas are valid both when the underlying assignment of skills to tasks is fixed or endogenous. We show qualitatively and quantitatively that contrary to conventional wisdom, if the tax system is initially suboptimal and progressive, the general‐equilibrium “trickle‐down” forces may raise the benefits of increasing the marginal tax rates on high incomes. We finally derive a parsimonious characterization of optimal taxes.

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Professor Paleveda's Paradox: When Higher Marginal Tax Rates Helped the Economy

SSRN Electronic Journal ◽

10.2139/ssrn.1983369 ◽

2011 ◽

Author(s):

Nicholas A. Paleveda

Keyword(s):

Tax Rates ◽

Marginal Tax Rates

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Transocean and the History of Tax Inversions

Issues in Accounting Education ◽

10.2308/iace-52321 ◽

2018 ◽

Vol 34 (1) ◽

pp. 1-12

Author(s):

Susan M. Albring ◽

Randal J. Elder ◽

Mitchell A. Franklin

Keyword(s):

Multinational Corporations ◽

Economic Impacts ◽

Income Taxes ◽

Tax Rates ◽

Corporate Tax ◽

Corporate Income Taxes ◽

History Of ◽

Jobs Act ◽

The U.S ◽

Over Time

ABSTRACT The first tax inversion in 1983 was followed by small waves of subsequent inversion activity, including two inversions completed by Transocean. Significant media and political attention focused on transactions made by U.S. multinational corporations that were primarily designed to reduce U.S. corporate income taxes. As a result, the U.S. government took several actions to limit inversion activity. The Tax Cuts and Jobs Act of 2017 (TCJA) significantly lowered U.S. corporate tax rates and one expected impact of TCJA is a reduction of inversion activity. Students use the Transocean inversions to understand the reasons why companies complete a tax inversion and how the U.S. tax code affects inversion activity. Students also learn about the structure of inversion transactions and how they have changed over time as the U.S. government attempted to limit them. Students also assess the tax and economic impacts of inversion transactions to evaluate tax policy.

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