Optimal Income Transfers

36 Pages Posted: 8 Jun 2006 Last revised: 27 Jul 2010

See all articles by Louis Kaplow

Louis Kaplow

Harvard Law School; National Bureau of Economic Research (NBER)

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Date Written: June 2006

Abstract

A substantial literature addresses the design of transfer programs and policies, including the negative income tax, other means-tested transfers, the earned income tax credit, categorical assistance, and work inducements. This work is largely independent of that on the optimal nonlinear income tax, yet formulations of such a tax necessarily address how low-income individuals should be treated. This paper draws on the optimal income taxation literature to illuminate the analysis of transfer programs, including the level and shape of marginal tax rates (including phase-outs), the structure of categorical assistance, and the role of work inducements in an optimal income transfer scheme.

Suggested Citation

Kaplow, Louis, Optimal Income Transfers (June 2006). NBER Working Paper No. w12284. Available at SSRN: https://ssrn.com/abstract=906762

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