What Is Wrong with the Flat Tax?
AbstractThe simplest flat tax proposals envisage a single marginal tax rate applying on all income. In the context of a simple model where agents vary in ability to earn, we demonstrate (a) that everyone is better off in the long run with an income-tax exemption for investment, than without it, and (b) that, in a static context, the optimal two-rate income tax is Pareto-superior to the optimal single-rate tax, under both Utilitarian and Rawlsian welfare functions.
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Bibliographic InfoPaper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number 98-18.
Length: 29 pages
Date of creation: 1998
Date of revision:
Find related papers by JEL classification:
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
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