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Optimal Piecewise Linear Income Taxation

Apps, Patricia; Long, Ngo; Rees, Ray

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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...[Show more]

dc.contributor.authorApps, Patricia
dc.contributor.authorLong, Ngo
dc.contributor.authorRees, Ray
dc.date.accessioned2015-12-10T22:38:49Z
dc.identifier.issn1467-9779
dc.identifier.urihttp://hdl.handle.net/1885/56896
dc.description.abstractGiven 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.
dc.publisherBlackwell Publishing Inc.
dc.sourceJournal of Public Economic Theory
dc.titleOptimal Piecewise Linear Income Taxation
dc.typeJournal article
local.description.notesImported from ARIES
local.identifier.citationvolume16
dc.date.issued2014
local.identifier.absfor140215 - Public Economics- Taxation and Revenue
local.identifier.absfor140104 - Microeconomic Theory
local.identifier.ariespublicationu4430637xPUB379
local.type.statusPublished Version
local.contributor.affiliationApps, Patricia, University of Sydney
local.contributor.affiliationLong, Ngo, College of Asia and the Pacific, ANU
local.contributor.affiliationRees, Ray, University of Munich
local.description.embargo2037-12-31
local.bibliographicCitation.issue4
local.bibliographicCitation.startpage523
local.bibliographicCitation.lastpage545
local.identifier.doi10.1111/jpet.12070
dc.date.updated2020-12-27T07:31:38Z
local.identifier.thomsonID000339547000001
CollectionsANU Research Publications

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