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Linearly Progressive Income Taxes and Stabilization

Author

Listed:
  • Nicolas Dromel

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique)

  • Patrick-Antoine Pintus

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

It has been shown that progressive income taxes may lead to saddle-point convergence when the marginal tax rate is assumed to be a continuously increasing function of income. This note shows that linearly progressive taxes may also immunize the economy against indeterminacy and sunspot equilibria. Therefore, our analysis suggests that exemption thresholds, as featured by prevailing tax codes, may help to stabilize the economy.

Suggested Citation

  • Nicolas Dromel & Patrick-Antoine Pintus, 2007. "Linearly Progressive Income Taxes and Stabilization," Post-Print halshs-00641124, HAL.
    • Handle: RePEc:hal:journl:halshs-00641124
    DOI: 10.1016/j.rie.2006.12.002
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    Cited by:

    1. Been-Lon Chen & Yunfang Hu & Kazuo Mino, 2018. "Does Nonlinear Taxation Stabilize Small Open Economies?," KIER Working Papers 997, Kyoto University, Institute of Economic Research.
    2. Miroslav Gabrovski & Jang‐Ting Guo, 2022. "Progressive taxation as an automatic stabilizer under nominal wage rigidity and preference shocks," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(3), pages 232-246, September.
    3. Kazuo Mino & Yasuhiro Nakamoto, 2008. "Progressive Taxation, Wealth Distribution, and Macroeconomic Stability," Discussion Papers in Economics and Business 08-22, Osaka University, Graduate School of Economics.
    4. Juin‐Jen Chang & Jang‐Ting Guo & Jhy‐Yuan Shieh & Wei‐Neng Wang, 2015. "Sectoral Composition Of Government Spending And Macroeconomic (In)Stability," Economic Inquiry, Western Economic Association International, vol. 53(1), pages 23-33, January.
    5. Jang-Ting Guo & Miroslav Gabrovski, 2019. "Progressive Taxation, Nominal Wage Rigidity, and Business Cycle Destabilization," Working Papers 201913, University of California at Riverside, Department of Economics.
    6. Juin‐Jen Chang & Jang‐Ting Guo & Jhy‐Yuan Shieh & Wei‐Neng Wang, 2019. "Sectoral composition of government spending, distortionary income taxation, and macroeconomic (in)stability," International Journal of Economic Theory, The International Society for Economic Theory, vol. 15(1), pages 95-107, March.
    7. Mohanad Ismael, 2014. "Progressive income taxes and macroeconomic instability," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 10(2), pages 49-61.
    8. Chen, Been-Lon & Hu, Yunfang & Mino, Kazuo, 2020. "Income Taxation Rules and Stability of a Small Open Economy," Journal of Macroeconomics, Elsevier, vol. 65(C).
    9. Chen, Shu-Hua, 2019. "On economic growth and automatic stabilizers under linearly progressive income taxation," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 378-395.
    10. Mohanad Ismael, 2010. "Progressive income taxes and macroeconomic instability," Documents de recherche 10-13, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    11. Nicolas Dromel & Patrick-Antoine Pintus, 2006. "Are Progressive Fiscal Rules Stabilizing?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00410452, HAL.
    12. Shu-Hua Chen & Jang-Ting Guo, 2019. "Progressive taxation as an automatic destabilizer under endogenous growth," Journal of Economics, Springer, vol. 127(1), pages 47-71, June.

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