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Revisiting the optimal linear income tax with categorical transfers

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  • Slack, Sean Edward

Abstract

When individuals differ in both productivity and some categorical attribute, optimal linear/piecewise-linear tax expressions are written to capture cases where it is suboptimal to eliminate inequality in the average social marginal value of income between categorical groups. Simulations provide examples.

Suggested Citation

  • Slack, Sean Edward, 2015. "Revisiting the optimal linear income tax with categorical transfers," Economics Letters, Elsevier, vol. 134(C), pages 73-77.
    • Handle: RePEc:eee:ecolet:v:134:y:2015:i:c:p:73-77
    DOI: 10.1016/j.econlet.2015.06.015
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    References listed on IDEAS

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    1. Paulus, Alari & Peichl, Andreas, 2009. "Effects of flat tax reforms in Western Europe," Journal of Policy Modeling, Elsevier, vol. 31(5), pages 620-636, September.
    2. Patricia Apps & Ngo Long & Ray Rees, 2014. "Optimal Piecewise Linear Income Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(4), pages 523-545, August.
    3. Alan D. Viard, 2001. "Optimal Categorical Transfer Payments: The Welfare Economics of Limited Lump‐Sum Redistribution," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 3(4), pages 483-500, October.
    4. Emmanuel Saez, 2001. "Using Elasticities to Derive Optimal Income Tax Rates," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(1), pages 205-229.
    5. Parsons, Donald O., 1996. "Imperfect 'tagging' in social insurance programs," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 183-207, October.
    6. Diamond, Peter & Sheshinski, Eytan, 1995. "Economic aspects of optimal disability benefits," Journal of Public Economics, Elsevier, vol. 57(1), pages 1-23, May.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Vincenzo Prete & Alessandro Sommacal & Claudio Zoli, 2016. "Optimal Non-Welfarist Income Taxation for Inequality and Polarization Reduction," Working Papers 23/2016, University of Verona, Department of Economics.
    2. Geir H. M. Bjertnæs, 2020. "The marginal (opportunity) cost of public funds," Discussion Papers 925, Statistics Norway, Research Department.
    3. Yang, Xiaoliang & Zhou, Peng, 2022. "Wealth inequality and social mobility: A simulation-based modelling approach," Journal of Economic Behavior & Organization, Elsevier, vol. 196(C), pages 307-329.
    4. Geir H. M. Bjertnæs, 2018. "The marginal cost of public funds in large welfare state countries," Discussion Papers 879, Statistics Norway, Research Department.
    5. Geir Bjertnaes, 2015. "Social Security Transfers and the Marginal Cost of Public Funds," CESifo Working Paper Series 5689, CESifo.

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    More about this item

    Keywords

    Between-group inequality; Categorical benefit; Linear income tax; Social marginal value of income;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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