International Tax and Public Finance

Inequality Externalities and Optimal Top Taxation with Endogenous Entrepreneurship

Journal Article
Reference
Berggren, Niclas (forthcoming). “Inequality Externalities and Optimal Top Taxation with Endogenous Entrepreneurship”. International Tax and Public Finance.

Author
Niclas Berggren

Inequality-as-externality models can justify very high top tax rates. This paper shows those results lean on abstractions that mute top-end responses. Once entrepreneurship and its spillovers enter, higher top rates can cut entry and innovation, weakening, or even reversing, the case for steep progressivity.