A Reconsideration of the Optimal Income Tax

Kevin Roberts

No 6, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: This paper develops a formula for the optimal nonlinear income tax, the terms of which are familiar from the theory of linear income taxation. The development uses the idea of a perturbation of the optimal schedule and is based upon as assumption of differentiability. It is also shown that the introduction of non-differentiability, implying bunching of taxpayers, may be desirable and, in this case, the optimal schedule may be difficult to determine. The analysis can be applied to nonlinear tax reform.

Keywords: nonlinear taxation; income taxation; bunching; tax reform (search for similar items in EconPapers)
JEL-codes: H21 H31 (search for similar items in EconPapers)
Date: 2000-03-01
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Citations: View citations in EconPapers (12)

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