Optimal Piecewise Linear Income Taxation

Patricia Apps (), Ngo Long and Ray Rees

No 655, CEPR Discussion Papers from Centre for Economic Policy Research, Research School of Economics, Australian National University

Abstract: Given its signiÖcance in practice, piecewise linear taxation has received relatively little attention in the literature. This paper o§ers 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 Önd that, given plausible parameter values and wage distributions, the globally optimal tax system is convex, and marginal rate progressivity increases with rising inequality.

Keywords: piecewise linear; income; taxation (search for similar items in EconPapers)
JEL-codes: H21 H31 J22 (search for similar items in EconPapers)
Date: 2011-12
New Economics Papers: this item is included in nep-acc, nep-cmp and nep-pub
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Optimal Piecewise Linear Income Taxation (2014)
Working Paper: Optimal Piecewise Linear Income Taxation (2011)
Working Paper: Optimal Piecewise Linear Income Taxation (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:auu:dpaper:655

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