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Title:Are two tax rates better than one? PDF Logo
Authors:FitzRoy, Felix R.
Jin, Jim
Issue Date:2009
Series/Report no.:IZA discussion papers 4167
Abstract:Should two-band income taxes be progressive given a general income distribution? We provide a negative answer under utilitarian and max-min welfare functions. While this result clarifies some ambiguities in the literature, it does not rule out progressive taxes in general. If we maximize total or weighted utility of the poor, as often intended by the society, progressive taxes can be justified, especially when the 'rich' are very rich. Under these objectives we obtain necessary conditions for progressive taxes, which only depend on aggregate features of income distributions. The validity of these conditions is examined using plausible income distributions.
Subjects:Progressive tax
utilitarian
max-min
help the poor
JEL:H20
D40
Persistent Identifier of the first edition:urn:nbn:de:101:1-20090605244
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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