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Optimal Taxation, Inequality and Top Incomes

Yuri Andrienko, Patricia Apps () and Ray Rees

No 690, CEPR Discussion Papers from Centre for Economic Policy Research, Research School of Economics, Australian National University

Abstract: In a number of high-income countries over the past few decades there has been a large growth in income inequality and at the same time a shift in the burden of taxation from the top to the middle of the income distribution. This paper applies the theory of optimal piecewise linear taxation to the issue of the taxation of top incomes. Our results suggest that an appropriate response to rising inequality is a shift towards a more progressive multi-bracket income tax system, with a more di¤erentiated structure of rates in the top percentiles.

Keywords: Optimal taxation; income distribution; top incomes; inequality (search for similar items in EconPapers)
JEL-codes: D31 D63 H21 H24 (search for similar items in EconPapers)
Date: 2014-07
New Economics Papers: this item is included in nep-pbe
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