Pareto-Improving Tax Reforms and the Earned Income Tax Credit

Arbeitspapier

This paper provides necessary and sufficient conditions for the existence of Pareto-improving tax reforms. The conditions can be expressed as sufficient statistics and have a wide range of potential applications in public finance. We discuss one such application in detail: the introduction of the Earned Income Tax Credit (EITC) in the US. We find that the EITC can be viewed as a response to an in-efficiency in the tax and transfer system prevailing at the time. This adds a new perspective to the literature on why the EITC is a good idea, emphasizing Pareto improvements rather than equity-efficiency trade-offs.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8358

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior ; Asymmetric and Private Information; Mechanism Design ; Taxation and Subsidies: Efficiency; Optimal Taxation
• Subject: tax reforms ; non-linear income taxation ; optimal taxation ; earned income tax credits ; pareto efficiency

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bierbrauer, Felix ; Boyer, Pierre C. ; Hansen, Emanuel
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/223430
• Last update: 10.03.2025, 11:41 AM CET