Publication type
Journal Article
Authors
Publication date
July 8, 2019
Summary:
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 associated with 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 the possible implications of a hypothetical switch to smoother income tax tariffs. It turns that smooth tax functions are convenient to eliminate bracket creep, while aggregate income inequality is uniformly reduced to a small extent.
Published in
Applied Economics
DOI
https://doi.org/10.1080/00036846.2019.1638500
Subjects
Notes
Online Early
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