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Optimal Income Transfers

  • Louis Kaplow

A substantial literature addresses the design of transfer programs and policies, including the negative income tax, other means-tested transfers, the earned income tax credit, categorical assistance, and work inducements. This work is largely independent of that on the optimal nonlinear income tax, yet formulations of such a tax necessarily address how low-income individuals should be treated. This paper draws on the optimal income taxation literature to illuminate the analysis of transfer programs, including the level and shape of marginal tax rates (including phase-outs), the structure of categorical assistance, and the role of work inducements in an optimal income transfer scheme.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12284.

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Date of creation: Jun 2006
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Publication status: published as Louis Kaplow, 2007. "Optimal income transfers," International Tax and Public Finance, Springer, vol. 14(3), pages 295-325, June.
Handle: RePEc:nbr:nberwo:12284
Note: PE
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