Gini and Optimal Income Taxation by Rank

Arbeitspapier

We solve the non-linear income tax program for a rank-dependent social welfare function à la Yaari, expressing the trade-off between size and inequality using the Gini or related families of positional indices. The key idea is that when agents optimize and absent bunching, ranks in the actual and optimal allocations become an invariant dimension. This allows us to obtain optimal marginal tax rates as a function of ranks, and numerically illustrate the relationship between ranks and taxes. For singles without children, the actual US tax schedule seems to indicate a distaste for differences in the upper part of the distribution.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8141

Classification and Topics

• Classification: Wirtschaft ; Equity, Justice, Inequality, and Other Normative Criteria and Measurement ; Asymmetric and Private Information; Mechanism Design ; Taxation and Subsidies: Efficiency; Optimal Taxation
• Subject: Gini ; optimal taxation ; income taxation ; ranks

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Simula, Laurent ; Trannoy, Alain
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/216537
• Last update: 10.03.2025, 11:45 AM CET