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A Reconsideration of the Optimal Income Tax


  • Kevin Roberts


This paper develops a formula for the optimal nonlinear income tax, the terms of which are familiar from the theory of linear income taxation. The development uses the idea of a perturbation of the optimal schedule and is based upon as assumption of differentiability. It is also shown that the introduction of non-differentiability, implying bunching of taxpayers, may be desirable and, in this case, the optimal schedule may be difficult to determine. The analysis can be applied to nonlinear tax reform.

Suggested Citation

  • Kevin Roberts, 2000. "A Reconsideration of the Optimal Income Tax," Economics Series Working Papers 6, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:6

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    nonlinear taxation; income taxation; bunching; tax reform;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household


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