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We study majority voting over selfishly optimal nonlinear income tax schedules proposed by a continuum of workers who can migrate between two competing jurisdictions. Both skill level and migration cost are the private information of each worker who will propose an allocation schedule that maximizes the utility of her own type. We identify reasonable scenarios in which the first-order approach applies and hence the second-order sufficient condition for incentive compatibility is fulfilled; otherwise, we need to apply the ironing surgery developed by Brett and Weymark (Games Econ Behav 101:172–188, 2017). Under quasilinear-in-consumption preferences, we show that the tax schedule proposed by the median skill type is the Condorcet winner, and provide a complete characterization of this tax schedule. While this schedule features negative marginal tax rates for low-skilled workers, it features positive rates for high-skilled workers with small migration elasticities; the marginal tax rates at the bottom and top skill levels cannot be unambiguously signed. Moreover, we detail the conditions under which migration induces uniformly higher or lower equilibrium marginal tax rates facing both low- and high-skilled workers than their counterparts in autarky, which leads us to conclude that geographic mobility does not always limit the government's ability to redistribute incomes via tax-transfer systems. [ABSTRACT FROM AUTHOR]

This paper studies pairwise majority voting over selfishly optimal nonlinear income tax schedules proposed by a continuum of individuals who differ in privately observable skills and make consumption comparisons, which creates a negative positional externality. It shows that the tax schedule preferred by the median skill type will win the voting contest. Given a reference consumption defined as the average consumption in the population, all skills face the same Pigouvian tax rate in the utilitarian optimum, whereas in selfish optima high skills face a Pigouvian tax rate larger than that facing low skills, generating a novel income redistributive effect. Under a constant elasticity of labor supply, two more results are obtained. First, for Pareto, Champernowne, Weibull, and lognormal skill distributions, the selfishly optimal tax schedule facing high (low) skills tends to be more progressive when the bottom‐skill's (top‐skill's) status concern intensifies. Second, it identifies the conditions under which, in the voting equilibrium, high skills face higher marginal tax rates while low skills face lower ones than what they face in the utilitarian optimum. [ABSTRACT FROM AUTHOR]

Recent evidence suggests that globalization has reduced the barriers to international labor mobility and induced more cross-country social comparisons. In an open economy with tax-driven migration and consumption externalities (relativity), we derive an optimal tax formula that subsumes existing ones obtained under a maximin social objective and additively separable utility and sign the second-best (Mirrleesian) marginal tax rates for all skill levels. We establish the thresholds of the elasticity and level of migration to determine when relativity and inequality act as complements or substitutes in shaping the optimal top tax rate. Under both Nash and Stackelberg tax competition if the migration probability of top-income workers is approximately 50%, numerical calculation using parameter estimates from empirical studies shows that the country with labor inflow (outflow) implements over 10% lower (higher) marginal tax rates than suggested by the autarky equilibrium of Kanbur and Tuomala (2013). [ABSTRACT FROM AUTHOR]

Purpose The purpose of this paper is to study whether it is a rational choice for a tax authority to impose an exit tax on capitalists.Design/methodology/approach The tax authority chooses a lump-sum exit tax to maximize a weighted objective of expected tax revenue and expected tax horizon. The tax revene consists of capital income taxes and exit taxes. Capitalists are motivated by sustainable capital accumulation and hence maximize the terminal capital stock.Findings The author finds that the objective function of the tax authority is strictly increasing in the exit tax, which holds for extensions with sales tax, labor income tax or proportional exit tax, and hence equilibrium exit tax is equal to an exogenous upper bound.Originality/value To the author’s knowledge, no existing literature investigates this issue theoretically, and hence the current paper represents the first attempt. The author hopes this theoretical analysis can trigger related empirical studies. [ABSTRACT FROM AUTHOR]