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An Innovative Approach to the Formation of a Progressive Taxation Probabilistic Model on Personal Incomes

Author

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  • Kalinina Olga

    (Peter the Great Saint-Petersburg Polytechnic University, 29 Polytechnicheskaya Street, St. Petersburg 195251, Russian Federation, Russian.)

Abstract

This article suggests a mathematical justification of the possibility of transition to progressive taxation on personal incomes, allowing socially redistribute the tax burden between different groups without losing the total amount of tax yield to the state budget from personal income tax. The methods of the transition from a flat to a progressive tax scale of income taxation developed. A generalized mathematical model of transition to progressive taxation, which allows evaluating all possible options for the proposed reform of flat rate transformation, is suggested. An algorithm of modeling progressive income taxation is proposed, which takes into account the likelihood of tax evasion. In the following parts of the article a probabilistic model of progressive income taxation and a mechanism to optimize the level of tax rates is formed. A linear progressive tax scale with and without tax evasion are developed based on actual statistics.

Suggested Citation

  • Kalinina Olga, 2016. "An Innovative Approach to the Formation of a Progressive Taxation Probabilistic Model on Personal Incomes," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 995-1002.
    • Handle: RePEc:eco:journ1:2016-03-23
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    References listed on IDEAS

    as
    1. Ravi Kanbur & Matti Tuomala, 2013. "Relativity, Inequality, And Optimal Nonlinear Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 1199-1217, November.
    2. Nezih Guner & Remzi Kaygusuz & Gustavo Ventura, 2014. "Income Taxation of U.S. Households: Facts and Parametric Estimates," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 559-581, October.
    3. Martin Feldstein, 1999. "Tax Avoidance And The Deadweight Loss Of The Income Tax," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 674-680, November.
    4. Nezih Guner & Remzi Kaygusuz & Gustavo Ventura, 2014. "Income Taxation of U.S. Households: Facts and Parametric Estimates," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 559-581, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Tax; Innovation; Probability; Method; Model;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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