This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Review
  4. November 2016
  5. Taxing Top CEO Incomes

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Taxing Top CEO Incomes

  • Laurence Ales
  • Christopher Sleet
American Economic Review
vol. 106, no. 11, November 2016
(pp. 3331–66)
Download Full Text PDF
(Complimentary)

Abstract

We use a firm-CEO assignment framework to model the market for CEO effective labor. In the model's equilibrium, more talented CEOs match with and supply more effort to larger firms. Taxation of CEO incomes affects the equilibrium pricing of CEO effective labor and, hence, spills over and affects firm profits. Absent the ability to tax profits or a direct concern for firm owners, a standard prescription for high marginal income taxes emerges. However, given such an ability or concern, the optimal marginal tax rates are much lower.

Citation

Ales, Laurence, and Christopher Sleet. 2016. "Taxing Top CEO Incomes." American Economic Review, 106 (11): 3331–66. DOI: 10.1257/aer.20151093

Additional Materials

JEL Classification

  • D31 Personal Income, Wealth, and Their Distributions
  • H21 Taxation and Subsidies: Efficiency; Optimal Taxation
  • H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
  • L25 Firm Performance: Size, Diversification, and Scope
  • M12 Personnel Management; Executives; Executive Compensation
  • M52 Personnel Economics: Compensation and Compensation Methods and Their Effects