Research Papers in Economics, Department of Economics, Stockholm University
Comments on Social Insurance and the Optimum Piecewise Linear Income Tax
Abstract: Using Varianīs social insurance framework with a piecewise
linear two bracket income tax, where t_1 is the tax rate in the lower
bracket and t_1+t_2 is the tax rate in the upper bracket, Strawcynski
(1998) claims that optimal requires t_1^*<t_2^*=1. This note provides three
comments: First, it shown that the argument thatt_2^*=1 does not
necessarily hold. Second, an equally reasonable interpretation of the
result is that t_2^*=0, if an explicit lump sum tax contingent on luck is
allowed. Third, the result also depends crucially on that income
differences are solely determined by luck, even if the population is ex
ante homogenous. In an example is it shown that then t_2^*=0 is optimal.
Keywords: Optimal taxation; social insurance; piecewise linear taxes; (follow links to similar papers)
JEL-Codes: H21; (follow links to similar papers)
6 pages, September 13, 1999
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
Questions (including download problems) about the papers in this series should be directed to Sten Nyberg ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom