10.1080/13504850410001674858">
 

Title

The rise and fall of graduated income tax rates

Document Type

Article

Publication Date

2004

Department

Economics

Abstract

This study constructs a wage distribution for the US from CPS data and then uses simulations to determine the optimal piecewise-linear-income tax. Previous optimal tax studies have generally found optimal marginal tax rates decline as income rises. This study argues this result arises because these previous studies assume that society will be willing to fund substantial guarantees. This study assumes that such a guarantee will not be politically acceptable, but that an exemption will be. In these circumstances it is found that optimal marginal tax rates rise as income rises. [PUBLICATION ABSTRACT]