American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Gini and Optimal Income Taxation by Rank
American Economic Journal: Economic Policy
vol. 14,
no. 3, August 2022
(pp. 352–79)
Abstract
We solve the nonlinear income tax program for rank-dependent social welfare functions, expressing the trade-off between size and inequality using the Gini and related families of positional indices. Absent bunching, ranks in the actual and optimal allocations are invariant. Exploiting this feature, we provide new, simple, and intuitive tax formulas for both the quasilinear and additive cases and new comparative static results. Our approach makes insights from optimal taxation more widely accessible. In some of our simulations the actual US tax policy is close to being optimal—except at the top, where optimal rates are much higher than in actuality.Citation
Simula, Laurent, and Alain Trannoy. 2022. "Gini and Optimal Income Taxation by Rank." American Economic Journal: Economic Policy, 14 (3): 352–79. DOI: 10.1257/pol.20200272Additional Materials
JEL Classification
- D31 Personal Income, Wealth, and Their Distributions
- D63 Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- H21 Taxation and Subsidies: Efficiency; Optimal Taxation
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- K34 Tax Law
There are no comments for this article.
Login to Comment