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Variable Earnings and Nonlinear Taxation

  • Michael Rothschild
  • Robert Moffitt

We explore the interaction between two facts. The first is that income is variable; the second is that the tax and transfer system transforms before tax income into after tax income in highly non-linear ways. The effect is to penalize (and reward) income variability in a manner which is both substantial and capricious.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1163.

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Date of creation: Jun 1983
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Publication status: published as Moffitt, Robert and Michael Rothschild. "Variable Earnings and Nonlinear Taxation," Journal of Human Resources, Vol. 22, No. 3, Summer 1987, pp. 405- 421.
Handle: RePEc:nbr:nberwo:1163
Note: PE
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