The optimal non-linear income tax

Momi Dahan; Michel Strawczynski

The optimal non-linear income tax

Research output: Book/Report › Book

Abstract

The dominant model for income taxation in the public finance literature is the classical model of skills (Mirrlees, 1971).
Until recently, an influential number of works using this model seemed to support declining marginal tax rates at high
income levels. In this paper we use Diamond's (1996) methodology in order to explore the critical assumptions that lead
to increasing or decreasing marginal tax rates. We find that with a lognormal distribution of skills and zero income effects
there is a case for increasing marginal tax rates at high income levels. By performing a Kernel estimation to Israeli data
we find empirical support for the lognormal distribution of skills.

Original language	English
Place of Publication	Jerusalem, Israel
Publisher	Bank of Israel, Research Department
Number of pages	38
State	Published - 1997

Bibliographical note

"March 1997."
Caption title.

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 1 No Poverty
SDG 10 Reduced Inequalities

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The optimal non-linear income tax

Abstract

Bibliographical note

UN SDGs

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