Age Dependent Taxation

Horizontal or vertical equity?  Matthew Weinzierl:

age-dependent taxes... the idea of making the tax rate contingent upon the age of the tax payer. ...the administratively simple reform of age dependence can make the tax system substantially more efficient and more equitable...:

• Age-dependent marginal tax rates are tailored to the distribution of income at each age. To see why, note that a 25-year-old earning $100,000 is higher in his or her age-specific income distribution than is a 45-year-old earning $100,000. Furthermore, these two workers are likely to have a different lifetime earnings path. We therefore ought to tax them differently.
• Age-dependent average tax rates can help individuals transfer earnings across the lifecycle when private borrowing and saving is restricted.
• Age dependence yields a large welfare gain by reducing distortions (lower marginal tax rates) and by making possible more redistribution.

See working paper (PDF)