Nonlinear Income Tax Reforms

Alan Krause

Discussion Papers from Department of Economics, University of York

Abstract: 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.

Keywords: tax reform; nonlinear income taxation. (search for similar items in EconPapers)
JEL-codes: H21 H24 (search for similar items in EconPapers)
Date: 2012-01
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:12/03

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