Optimal Taxation, Inequality and Top Incomes

20 Pages Posted: 29 Nov 2014

See all articles by Yuri Andrienko

Yuri Andrienko

The University of Sydney

Patricia F. Apps

The University of Sydney Law School; IZA Institute of Labor Economics

Ray Rees

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute); University of Sydney Law School

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Date Written: May 30, 2014

Abstract

In a number of high-income countries over the past few decades there has been a large growth in income inequality and at the same time a shift in the burden of taxation from the top to the middle of the income distribution. This paper applies the theory of optimal piecewise linear taxation to the issue of the taxation of top incomes. Our results suggest that an appropriate response to rising inequality is a shift towards a more progressive multi-bracket income tax system, with a more differentiated structure of rates in the top percentiles.

Keywords: Optimal taxation, income distribution, top incomes, inequality

JEL Classification: H21, H24, D31, D63, K10, K30, K34

Suggested Citation

Andrienko, Yuri and Apps, Patricia F. and Rees, Ray, Optimal Taxation, Inequality and Top Incomes (May 30, 2014). Sydney Law School Research Paper No. 14/103, Available at SSRN: https://ssrn.com/abstract=2531488 or http://dx.doi.org/10.2139/ssrn.2531488

Yuri Andrienko

The University of Sydney ( email )

Patricia F. Apps (Contact Author)

The University of Sydney Law School ( email )

Faculty of Law, New Law Building F10
The University of Sydney
Sydney, NSW 2006
Australia
+61 2 9351 0241 (Phone)
+61 2 9351 0200 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Ray Rees

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Munich, D-80539
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

University of Sydney Law School ( email )

Sydney
Australia

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