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Menus of Linear Income Tax Schedules

Author

Listed:
  • Alberto Alesina
  • Philippe Weil

Abstract

Relative to traditional piecewise linear income taxation schemes, it is possible to increase government revenues by offering to consumers a menu of linear income tax schedules. In the resulting Pareto-superior equilibrium, consumers sort themselves out according to their (unobservable) productivity level, with high productivity agents choosing the tax schedules with low marginal tax rate and high intercept. This scheme extracts from the economy an unexploited source of revenue which, in contrast with standard supply-side proposals, does not depend on the economy being on the downward-sloping side of the Laffer curve.

Suggested Citation

  • Alberto Alesina & Philippe Weil, 1992. "Menus of Linear Income Tax Schedules," NBER Working Papers 3968, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3968
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    References listed on IDEAS

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    1. Sheshinski, Eytan, 1989. "Note on the shape of the optimum income tax schedule," Journal of Public Economics, Elsevier, vol. 40(2), pages 201-215, November.
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    3. McDonald, James B & Ransom, Michael R, 1979. "Functional Forms, Estimation Techniques and the Distribution of Income," Econometrica, Econometric Society, vol. 47(6), pages 1513-1525, November.
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    6. Eytan Sheshinski, 1972. "The Optimal Linear Income-tax," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 39(3), pages 297-302.
    7. Slemrod, Joel & Yitzhaki, Shlomo & Mayshar, Joram & Lundholm, Michael, 1994. "The optimal two-bracket linear income tax," Journal of Public Economics, Elsevier, vol. 53(2), pages 269-290, February.
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    Cited by:

    1. Laszlo Goerke, 2015. "Income tax buyouts and income tax evasion," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(1), pages 120-143, February.
    2. Del Negro, Marco & Perri, Fabrizio & Schivardi, Fabiano, 2010. "Tax buyouts," Journal of Monetary Economics, Elsevier, vol. 57(5), pages 576-595, July.
      • Marco Del Negro & Fabrizio Perri & Fabiano Schivardi, 2010. "Tax Buyouts," EIEF Working Papers Series 1007, Einaudi Institute for Economics and Finance (EIEF), revised Mar 2010.
      • Marco Del Negro & Fabrizio Perri & Fabiano Schivardi, 2010. "Tax buyouts," NBER Working Papers 15847, National Bureau of Economic Research, Inc.
      • Marco Del Negro & Fabrizio Perri & Fabiano Schivardi, 2010. "Tax buyouts," Staff Reports 467, Federal Reserve Bank of New York.
      • Marco Del Negro & Fabrizio Perri & Fabiano Schivardi, 2010. "Tax buyouts," Staff Report 441, Federal Reserve Bank of Minneapolis.
    3. Erzo F.P. Luttmer & Richard J. Zeckhauser, 2008. "Schedule Selection by Agents: from Price Plans to Tax Tables," NBER Working Papers 13808, National Bureau of Economic Research, Inc.
    4. De Donder, Philippe & Hindriks, Jean, 1998. "The Political Economy of Targeting," Public Choice, Springer, vol. 95(1-2), pages 177-200, April.

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