Social insurance and the optimum piecewise linear income tax

Michel Strawczynski*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

This paper calculates optimal linear income taxes when differences in income are caused by random factors ('luck') rather than by unobserved individual skills, as assumed in the classical theory of income taxation. As first shown by [Varian, H.R., 1980. Redistributive taxation as social insurance, Journal of Public Economics 14, 49-68] in the former case income taxation acts as social insurance. By introducing life uncertainty and precautionary behavior, we find higher optimal marginal tax rates than those found by Varian. We also find that - in the context of a piecewise two-bracket linear tax schedule - the second marginal tax is higher than the first, a finding that contrasts with results recently obtained in the framework of classical income taxation theory, which show a lower second marginal tax.

Original languageAmerican English
Pages (from-to)371-388
Number of pages18
JournalJournal of Public Economics
Volume69
Issue number3
DOIs
StatePublished - 1 Sep 1998
Externally publishedYes

Keywords

  • H21
  • Life uncertainty
  • Linear income tax
  • Precutionary behavior

Fingerprint

Dive into the research topics of 'Social insurance and the optimum piecewise linear income tax'. Together they form a unique fingerprint.

Cite this