Optimal Federal Taxes with Public Inputs

Family Social Security taxes compared with Federal income taxes, 1979.

Increases in Social Security taxes during the past decade or so have prompted frequent comparisons of Social Security taxes and Federal personal income taxes. In this article, new evidence is brought to bear on this issue. Two specific questions are addressed: For 1979, what percentage of family units paid more in Social Security tax than in Federal income tax? How did this relationship between...

Public debt and optimal taxes without commitment

Benhabib and Rustichini [Optimal taxes without commitment, J. Econ. Theory 77 (1997) 231–259] study the properties of optimal capital taxes in economies without commitment and no government debt. They find that capital taxes may be different from zero at steady state. This note shows that, once governments have the possibility of issuing debt and smoothing taxes over time, optimal steady state ...

A comparison of social security taxes and Federal income taxes.

In recent years, with the implementation of the tax rate increases and ad hoc earnings base increases included in the 1977 Amendments to the Social Security Act, many observers have noted that social security taxes (for the old-age and survivors insurance (OASI), disability insurance (DI), and hospital insurance (HI) programs combined) now exceed Federal income taxes for many families. The ques...

Federal Income Taxes and Investment Strategy

Poverty, Not Inequality: Federal Taxes and Redistribution

The federal tax system, and the income tax in particular, is often held out as a key—perhaps the key tool—for combatting income inequality. Especially given the rapid rise in inequality seen over the last 30 years, it is natural to look to the tax code and ask what can be done in response. However, this article’s answer to that question is “not much,” because of the practical constraints on pol...