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Linear Transformation Method in the Formation of the Personal Income Tax Scale in Russia

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  • Leisan A. Gafarova

Abstract

The purpose of the article is a mathematical justification of the quantitative values of the main parameters of the progressive income tax scale in Russian conditions, considering social and economic parameters. Based on the methods of regression analysis, the boundary of the non-taxable minimum of income tax is determined as the extremum of the polynomial function of the second degree of savings behavior of the population from income. The non-taxable minimum is determined by considering the median income of 78% of the average per capita income. Within the framework of this stage, cross section data were used for 85 constituent entities of the Russian Federation: the savings rate of the population and the average per capita income of the population. Our modified method of linear transformation, which considers differentiated taxation of income within separate tax intervals, allowed us to determine the income tax rates of the proposed tax scale. It is empirically confirmed that the proposed progressive income tax scale can provide significant social, economic and fiscal effects. The study showed that the proposed progressive scale has the greatest effect on regions with initially low parameters of socio-economic development. The rates of the progressive income tax scale substantiated in the study make it possible to ensure a reduction in the tax burden on low-income groups of the population, an increase in entrepreneurial and savings activity of the middle-income group of the population, and an increase in the role of high-income groups in the formation of the revenue side of the budget.

Suggested Citation

  • Leisan A. Gafarova, 2025. "Linear Transformation Method in the Formation of the Personal Income Tax Scale in Russia," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 11(1), pages 100-120.
    • Handle: RePEc:aiy:jnljtr:v:11:y:2025:i:1:p:100-120
    DOI: https://doi.org/10.15826/jtr.2025.11.1.194
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    References listed on IDEAS

    as
    1. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6, National Bureau of Economic Research, Inc.
    2. Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 2000. "What Drives Private Saving Across the World?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 165-181, May.
    3. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    personal income taxation; tax policy; living wage; state budget; income inequality; linear transformation method; regression analysis;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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