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]
Citation
Moreland, K. W. (2004). The rise and fall of graduated income tax rates. Applied Economics Letters, 11(4), 227–229. doi:10.1080/13504850410001674858