Marginal Tax Rates and Income Inequality in a Life-Cycle Model
David Altig, Charles T. Carlstrom
American Economic Review · 1999 · Volume 89 · Issue 5
Abstract
In this paper we study the quantitative impact of marginal tax rates on the distribution of income. Our methodology builds on computable general-equilibrium framework. We find that distortions from marginal tax rate changes of the sort implied by the Tax Reform Act of 1986 have sizable effects on income inequality in a reasonably quantified life-cycle setting: In our model rate changes alone capture half the increase in the pretax Gini that actually occurred between 1984 and 1989.
Keywords
Taxation and Subsidies: Externalities, Redistributive Effects, Environmental Taxes and Subsidies, Fiscal Policies and Behavior of Economic Agents: Household, Personal Income, Wealth, and Their Distributions
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