Gini and Optimal Income Taxation by Rank

Laurent Simula and Alain Trannoy

No 8141, CESifo Working Paper Series from CESifo

Abstract: We solve the non-linear income tax program for a rank-dependent social welfare function à la Yaari, expressing the trade-off between size and inequality using the Gini or related families of positional indices. The key idea is that when agents optimize and absent bunching, ranks in the actual and optimal allocations become an invariant dimension. This allows us to obtain optimal marginal tax rates as a function of ranks, and numerically illustrate the relationship between ranks and taxes. For singles without children, the actual US tax schedule seems to indicate a distaste for differences in the upper part of the distribution.

Keywords: Gini; optimal taxation; income taxation; ranks (search for similar items in EconPapers)
JEL-codes: D63 D82 H21 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-pbe and nep-pub
References: Add references at CitEc
Citations: View citations in EconPapers (4)

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Journal Article: Gini and Optimal Income Taxation by Rank (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8141

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