Smooth Income Tax Schedules: Derivation and Consequences

Arbeitspapier

Existing tax schedules are often overly complex and characterized by discontinuities in the marginal tax burden. In this paper we propose a class of progressive smooth functions to replace personal income tax schedules. These functions depend only on three meaningful parameters, and avoid the drawbacks of defining tax schedules through various tax brackets. Based on representative micro data, we derive revenue-neutral parameters for four different types of tax regimes (Austria, Germany, Hungary and Spain). We then analyze possible implications from a hypothetical switch to smoother income tax tariffs. We find that smooth tax functions eliminate the most extreme cases of bracket creep, while the impact on income inequality is mostly negligible, but uniformly reducing.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IZA Discussion Papers ; No. 11493

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes ; Computational Techniques; Simulation Modeling
• Thema: personal income taxation ; income distribution ; nonlinear smooth tax tariff ; microsimulation

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Estévez Schwarz, Diana ; Sommer, Eric
• Ereignis: Veröffentlichung
• (wer): Institute of Labor Economics (IZA)
• (wo): Bonn
• (wann): 2018

Weitere Informationen

• Handle: http://hdl.handle.net/10419/180511
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ