Optimal Piecewise Linear Income Taxation
AbstractGiven its signiÖcance in practice, piecewise linear taxation has received relatively little attention in the literature. This paper o§ers a simple and transparent analysis of its main characteristics. We fully characterize optimal tax parameters for the cases in which budget sets are convex and nonconvex respectively. A numerical analysis of a discrete version of the model shows the circumstances under which each of these cases will hold as a global optimum. We Önd that, given plausible parameter values and wage distributions, the globally optimal tax system is convex, and marginal rate progressivity increases with rising inequality.
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Bibliographic InfoPaper provided by Centre for Economic Policy Research, Research School of Economics, Australian National University in its series CEPR Discussion Papers with number 655.
Date of creation: Dec 2011
Date of revision:
piecewise linear; income; taxation;
Other versions of this item:
- Patricia Apps & Ngo Van Long & Ray Rees, 2009. "Optimal Piecewise Linear Income Taxation," CESifo Working Paper Series 2565, CESifo Group Munich.
- Apps, Patricia & Long, Ngo Van & Rees, Ray, 2011. "Optimal Piecewise Linear Income Taxation," IZA Discussion Papers 6007, Institute for the Study of Labor (IZA).
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-01-03 (Accounting & Auditing)
- NEP-ALL-2012-01-03 (All new papers)
- NEP-CMP-2012-01-03 (Computational Economics)
- NEP-PUB-2012-01-03 (Public Finance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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