A Study on Improvements of Earned Income Taxation through Comparison of Income Tax Wedge

2018 ◽  
Vol 31 (1) ◽  
pp. 207-231
Author(s):  
Yu-Seok Jeong
Keyword(s):  
Income Tax ◽  
Income Taxation ◽  
Earned Income

scholarly journals The Nordic model: 25 years of drawing the line between earned and capital income in Finland

2018 ◽  
Vol 2018 (1) ◽  
pp. 64-80
Author(s):  
Reijo Knuutinen
Keyword(s):  
Tax Policy ◽  
Income Tax ◽  
Tax Avoidance ◽  
Personal Income ◽  
Income Taxation ◽  
Court Cases ◽  
Capital Income ◽  
Earned Income ◽  
Tax Legislation ◽  
Personal Income Taxation

Abstract In personal income taxation, Finland had used the dualistic income tax model, known as the Nordic model, since 1993. The basic idea is that taxation of earned income is progressive, whereas taxation of capital income is proportional. Here, the model is reviewed from different perspectives: What kind of tax policy background does it have and how is the distinction between types of income argued for on theoretical grounds? How has the borderline of earned and capital income been drawn in tax legislation, and how is it drawn in the court cases, in particular in those related to tax avoidance? The dualistic model has often been criticized using equity arguments, but there are still strong arguments for the model. In any case, the model has not always worked too well in practice. The distinction has required special tax legislation as well as given rise to many court cases.

Optimal Income Taxation with Unemployment and Wage Responses: A Sufficient Statistics Approach

2020 ◽  
Vol 12 (1) ◽  
pp. 254-292 ◽  
Author(s):  
Kory Kroft ◽  
Kavan Kucko ◽  
Etienne Lehmann ◽  
Johannes Schmieder
Keyword(s):  
Income Tax ◽  
The United States ◽  
Income Taxation ◽  
Optimal Income Taxation ◽  
Sufficient Statistics ◽  
Earned Income ◽  
Tax Progressivity ◽  
Negative Income ◽  
Policy Variation ◽  
Negative Income Tax

We derive a sufficient statistics tax formula in a model that incorporates unemployment and endogenous wages to study the shape of the optimal income tax. Key sufficient statistics are the macro employment response to taxation, the micro and macro participation response to taxation, and the wage-moderating effect of tax progressivity. We empirically implement the tax formula by estimating the micro and macro elasticities using policy variation from the United States. Our results suggest that the optimal tax more closely resembles a negative income tax than an earned income tax credit relative to the case where unemployment and wage responses are ignored. (JEL E24, H21, H23, H24, H31, J22, J31)

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