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TaxSolver: A methodology to realize optimal income tax reform

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  • Mark Verhagen
  • Menno Schellekens
  • Michael Garstka

Abstract

Across the globe there are growing calls to streamline and improve ever more complex income tax codes. Executing reform has proven difficult. Even when the desired outcomes are clear, the tools to design fitting reforms are lacking. To remedy this, we developed \texttt{TaxSolver}: a methodology to help policymakers realize optimal tax reform. \texttt{TaxSolver} allows policymakers to focus solely on what they aim to achieve with a reform -- like redistributing wealth, incentivizing labor market participation or reducing complexity -- and the guarantees within which reform is acceptable -- like limited fluctuations in taxpayer incomes or shocks to overall tax revenue. Given these goals and fiscal guarantees, \texttt{TaxSolver} finds the optimal set of tax rules that satisfies all the criteria or shows that the set of demands are not mathematically feasible. We illustrate \texttt{TaxSolver} by reforming various simulated examples of tax codes, including some that reflect the complexity and size of a real-world tax system.

Suggested Citation

  • Mark Verhagen & Menno Schellekens & Michael Garstka, 2025. "TaxSolver: A methodology to realize optimal income tax reform," Papers 2508.03708, arXiv.org, revised Oct 2025.
    • Handle: RePEc:arx:papers:2508.03708
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    References listed on IDEAS

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