125 Equilibrium Redistribution under Ex-ante Heterogeneity and Income-Dependent Voting
- Bo Hyun Chang; Yongsung Chang; Sun-Bin Kim;
- Exante_2019_Oct_1.pdf
Abstract
From a utilitarian point of view, the optimal income tax rate in the U.S. should be much higher than the current one (e.g., Piketty and Saez (2013)). A majority of the population would be in favor of raising taxes, as the income distribution is highly skewed. We show that the political equilibrium is actually close to the current tax rate, once we take into account (i) the ex-ante heterogeneity of earnings (Guvenen, 2009) and (ii) income-dependent voting behavior (Mahler, 2008) across households.
Keywords: Optimal Tax; Ex-ante Heterogeneity; Voting Turnout Rates
JEL classification: E62; H21; H31