Menus of Linear Income Tax Schedules

28 Pages Posted: 18 Jun 2004

See all articles by Alberto F. Alesina

Alberto F. Alesina

Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Philippe Weil

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: January 1992

Abstract

Relative to traditional piecewise linear income taxation schemes, it is possible to increase government revenues by offering to consumers a menu of linear income tax schedules. In the resulting Pareto-superior equilibrium, consumers sort themselves out according to their (unobservable) productivity level, with high productivity agents choosing the tax schedules with low marginal tax rate and high intercept. This scheme extracts from the economy an unexploited source of revenue which, in contrast with standard supply-side proposals, does not depend on the economy being on the downward-sloping side of the Laffer curve.

Suggested Citation

Alesina, Alberto F. and Weil, Philippe, Menus of Linear Income Tax Schedules (January 1992). NBER Working Paper No. w3968. Available at SSRN: https://ssrn.com/abstract=447256

Alberto F. Alesina (Contact Author)

Harvard University - Department of Economics ( email )

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Cambridge, MA 02138
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Centre for Economic Policy Research (CEPR)

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United Kingdom

National Bureau of Economic Research (NBER)

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Philippe Weil

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

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Brussels, B-1050
Belgium
+32 2 650 4220 (Phone)
+32 2 650 4475 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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