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A Reconsideration of the Optimal Income Tax.

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.

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Volume:
006
Series:
Discussion paper series
Publication date:
2000-01-01
URN:
uuid:f02480dc-865d-4116-a247-43e472fae82a
Local pid:
ora:1042
Language:
English

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