Feasible smooth income tax schedules: benefits and distributional implications

C-Tier
Journal: Applied Economics
Year: 2020
Volume: 52
Issue: 2
Pages: 175-194

Authors (2)

D. Estévez Schwarz (not in RePEc) E. Sommer (Institute of Labor Economics (...)

Score contribution per author:

0.503 = (α=2.01 / 2 authors) × 0.5x C-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Existing tax schedules are often overly complex and characterized by discontinuities in the marginal tax burden. In this paper, we propose a class of progressive smooth functions to replace personal income tax schedules. These functions depend only on three meaningful parameters, and avoid the drawbacks associated with defining tax schedules through various tax brackets. Based on representative micro data, we derive revenue-neutral parameters for four different types of tax regimes (Austria, Germany, Hungary and Spain). We then analyze the possible implications of a hypothetical switch to smoother income tax tariffs. It turns that smooth tax functions are convenient to eliminate bracket creep, while aggregate income inequality is uniformly reduced to a small extent.

Technical Details

RePEc Handle
repec:taf:applec:v:52:y:2020:i:2:p:175-194
Journal Field
General
Author Count
2
Added to Database
2026-01-29