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Comparing Optimum Non-linear Income Taxation with Optimum Linear Income Taxation

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Authors
Choi, SeonKyou
Issue Date
1993
Publisher
Seoul Journal of Economics
Citation
Seoul Journal of Economics 6 (No. 2 1993): 173-200
Keywords
non-linear income tax system; the truth telling mechanism; linear income taxation
Abstract
As Income tax regime changes, the welfare levels of different types of Individuals also change. This paper studies the welfare change of individuals with different abilities under different income tax regimes: the non-linear Income tax system and the linear Income tax system. Overall level of social welfare is enhanced in the non-linear system. Though the marginal tax on the high ability people is zero under non-linear income taxation, the simulation results show that high ability type is worse off under reasonable estimates of elasticity of substitution between consumption and leisure. The low and middle ability types are better off under the non-linear system. When the elasticity of substitution is low, non-linear income taxation is Pareto-superior. It makes all types of Individuals better off than linear Income taxation.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/1018
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.06(2) (Summer 1993)
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