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| Author: | Simula, L. Trannoy, A. |
| Title: | Optimal income tax under the threat of migration by top-income earners |
| Journal: | Journal of Public Economics
2010 : FEB, VOL. 94:1-2, p. 163-173 |
| Index terms: | taxation income tax emigration models France |
| Language: | eng |
| Abstract: | An individual (henceforth as: ind/s.) emigrates in case his/her domestic utility is less than his utility abroad, net of migration costs, utilities and costs depending on productivity. This paper examines how allowing ind/s. to emigrate to pay lower taxes changes the optimal non-linear income tax scheme in a Mirrlesian economy. A simple formula, complementing Saez's formula obtained in closed economy, is derived for the marginal tax rates (here as: m-t-rts.) faced by top-income ind/s. It depends on the labour elasticity, the tax rate abroad and the migration costs presented as a fraction of the utility obtained abroad. For the whole population, the Rawlsian m-t-rts. illustrate a curse of the middle-skilled. For the French economy, there are provided simulations. |
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