Higher Taxes at the Top: The Role of Entrepreneurs

This paper computes optimal top marginal tax rates in Bewley-Huggett-Aiyagari–type economies that include entrepreneurs. Consistent with the data, entrepreneurs are overrepresented at of income distribution and thus disproportionately affected by an increase rate. The rate maximizes welfare is 60 percent. While average gains positive similar across occupations along transition, they larger for than workers long run, this occupational gap after widens increasing income. (JEL D11, D21, D31, H21, H24, L26)