Nonlinear Income Tax Reforms
This paper addresses questions of the following nature: under what conditions does a welfare-improving reform of a nonlinear income tax system necessitate a change in a particular agent's marginal tax rate or total tax burden? Our analysis is therefore a study in tax reform, rather than in optimal taxation. We consider a simple model with three types of agents (high-skill, middle-skill, and low-skill) who have preferences that are quasi-linear in labour. Under these assumptions and using our methodology, specific characteristics of the initial suboptimal tax system can be determined when all welfare-improving tax reforms require specified changes in a particular agent's tax treatment. Some other necessary features of the tax reform can also be determined. Thus, unlike many tax reform analyses in the literature, we are able to reach a number of clear-cut conclusions.
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- Brett, Craig & Weymark, John A., 2011.
"How optimal nonlinear income taxes change when the distribution of the population changes,"
Journal of Public Economics,
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"Optimal Nonlinear Income Tax and Nonlinear Pricing: Optimality Conditions and Comparative Static Properties,"
Working Paper Series, Center for Fiscal Studies
2009:11, Uppsala University, Department of Economics.
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"Socially Improving Tax Reforms,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1505-1537, November.
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- Paul Makdissi & Jean-Yves Duclos, 2002. "Socially-Improving Tax Reforms," Cahiers de recherche 02-01, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke, revised 2004.
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- Alan Krause, 2009. "A general equilibrium analysis of the Laffer argument," Social Choice and Welfare, Springer, vol. 33(4), pages 601-615, November.
- Sushama Murty & R. Robert Russell, 2005. "Externality Policy Reform: A General Equilibrium Analysis," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(1), pages 117-150, 02.
- Alan Krause, 2007. "Generational incidence of savings taxation versus capital-income taxation," International Journal of Economic Theory, The International Society for Economic Theory, vol. 3(2), pages 113-129.
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