Working Paper Series, Uppsala Center for Fiscal Studies, Department of Economics, Uppsala University
Tax Policy and Employment: How Does the Swedish System Fare?
() and Håkan Selin
Abstract: This paper reviews the literature on optimal taxation of
labour income and the empirical work on labour supply and the elasticity of
taxable income in Sweden. It also presents an overview of Swedish taxation
of labour income, offers calculations on the development in effective
marginal tax rates and participation tax rates, and estimates, using the
difference-in-differences method, the impact of tax incentives on
employment rates of elderly workers. After this background, we ponder
possibilities for reforming the Swedish tax system to improve its labour
market impacts. We suggest better targeting the earned income tax credit at
families and low-income workers, lowering the top marginal tax rates, and
maintaining the tax incentives for older workers.
Keywords: Optimal taxation; labour income taxation; labour supply; taxable income; Swedish tax system.; (follow links to similar papers)
JEL-Codes: H21; H24; J22; (follow links to similar papers)
73 pages, February 1, 2011
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