Variable Earnings and Nonlinear Taxation
Robert Moffitt () and
Michael Rothschild ()
Journal of Human Resources, 1987, vol. 22, issue 3, 405-421
Tax and transfer programs transform before-tax income into after-tax income. Income is variable and the tax and transfer system is nonlinear-i.e., marginal tax rates vary. We show that, as a consequence, the tax and transfer system punishes (and rewards) income variability. We calculate the effect of the nonlinearity for several components of the U.S. tax and transfer system, focusing on the low-income population. We find that the system rewards variability for some individuals and penalizes it for others. We conclude that the tax and transfer system punishes and rewards variability in a manner that is both substantial and capricious.
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Working Paper: Variable Earnings and Nonlinear Taxation (1983)
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Persistent link: https://EconPapers.repec.org/RePEc:uwp:jhriss:v:22:y:1987:i:3:p:405-421
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