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| Title: | | Optimal piecewise linear income taxation  |
| Authors: | | Apps, Patricia Long, Ngo Van Rees, Ray |
| Issue Date: | | 2011 |
| Series/Report no.: | | Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 6007 |
| Abstract: | | Given its significance in practice, piecewise linear taxation has received relatively little attention in the literature. This paper offers a simple and transparent analysis of its main characteristics. We fully characterize optimal tax parameters for the cases in which budget sets are convex and nonconvex respectively. A numerical analysis of a discrete version of the model shows the circumstances under which each of these cases will hold as a global optimum. We find that, given plausible parameter values and wage distributions, the globally optimal tax system is convex, and marginal rate progressivity increases with rising inequality. |
| Subjects: | | piecewise linear income, taxation |
| JEL: | | H21 H31 J22 |
| Persistent Identifier of the first edition: | | urn:nbn:de:101:1-201110263452 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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