Gini and optimal income taxation by rank by Laurent Simula and Alain Trannoy
By: Simula, Laurent
.
Contributor(s): Trannoy, Alain.
Material type: 
ArticleSubject(s): IMPUESTO SOBRE LA RENTA DE LAS PERSONAS FISICAS | POLITICA FISCAL | DESIGUALDAD | INGRESOS FISCALES | VARIABLES ESTADISTICAS | ANALISIS DE DATOS | ESTADOS UNIDOS
In:
American Economic Journal : Economic Policy v. 14, n. 3, August 2022, p. 352-379Summary: We solve the nonlinear income tax program for rank-dependent social welfare functions, expressing the trade-off between size and inequality using the Gini and related families of positional indices. Absent bunching, ranks in the actual and optimal allocations are invariant. Exploiting this feature, we provide new, simple, and intuitive tax formulas for both the quasilinear and additive cases and new comparative static results. Our approach makes insights from optimal taxation more widely accessible. In some of our simulations the actual US tax policy is close to being optimal—except at the top, where optimal rates are much higher than in actuality.
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| OP 2135/2022/2 American Economic Journal : Economic Policy | OP 2135/2022/2-1 The electric Gini | OP 2135/2022/3 American Economic Journal : Economic Policy | OP 2135/2022/3-1 Gini and optimal income taxation by rank | OP 2135/2022/4 American Economic Journal : Economic Policy | OP 2135/2022/4-1 Behavioral responses to wealth taxes | OP 2135/2022/4-2 Your place in the world |
Resumen
We solve the nonlinear income tax program for rank-dependent social welfare functions, expressing the trade-off between size and inequality using the Gini and related families of positional indices. Absent bunching, ranks in the actual and optimal allocations are invariant. Exploiting this feature, we provide new, simple, and intuitive tax formulas for both the quasilinear and additive cases and new comparative static results. Our approach makes insights from optimal taxation more widely accessible. In some of our simulations the actual US tax policy is close to being optimal—except at the top, where optimal rates are much higher than in actuality.
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