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A proposal for a simple average-based progressive taxation system

Author

Listed:
  • Dirk-Hinnerk Fischer

    (Tallinn University of Technology, Tallinn, Estonia)

  • Simona Ferraro

    (Tallinn University of Technology, Tallinn, Estonia)

Abstract

This paper is a first theoretical presentation of a simple progressive taxation system. The system is based on two adaptations of one easily calculable formula that is based on the societal average income of the previous year. The system contributes to academic discussions as it is a novel approach. It is a progressive tax that does not discriminate against anyone as the progression increases continuously and the increase in tax payment does not go beyond the additional income. The analysis in the paper shows that the core advantage of the system is its simple, transparent and adaptable mechanism.

Suggested Citation

  • Dirk-Hinnerk Fischer & Simona Ferraro, 2019. "A proposal for a simple average-based progressive taxation system," Public Sector Economics, Institute of Public Finance, vol. 43(2), pages 141-165.
    • Handle: RePEc:ipf:psejou:v:43:y:2019:i:2:p:141-165
    DOI: 10.3326/pse.43.2.2
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    References listed on IDEAS

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    1. Peter Diamond & Emmanuel Saez, 2011. "The Case for a Progressive Tax: From Basic Research to Policy Recommendations," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 165-190, Fall.
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    6. Krueger, Dirk & Ludwig, Alexander, 2016. "On the optimal provision of social insurance: Progressive taxation versus education subsidies in general equilibrium," Journal of Monetary Economics, Elsevier, vol. 77(C), pages 72-98.
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    8. R. A. Musgrave & Tun Thin, 1948. "Income Tax Progression, 1929-48," Journal of Political Economy, University of Chicago Press, vol. 56(6), pages 498-498.
    9. Anthony John Evans & Paul Dragos Aligica, 2008. "The Spread of the Flat Tax in Eastern Europe: A Comparative Study," Eastern European Economics, Taylor & Francis Journals, vol. 46(3), pages 49-67, May.
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    More about this item

    Keywords

    taxation; flat tax; progressive tax; taxation efficiency;
    All these keywords.

    JEL classification:

    • 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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