Two kinds of directional reforms of a linear income tax system are studied in this article. First, income tax reform is studied from the perspective of a planner interested in obtaining a second-best optimum. Necessary and sufficient conditions for the existing tax parameters to be a local second-best optimum are obtained. In addition, for nonoptimal tax schedules, the set of Pareto-improving, production-efficiency-preserving directions of tax reform are characterized. Second, majority-rule directions of income tax reform are considered. A complete characterization of the changes in the values of the tax parameters that would be predicted to result from a majority vote over directions of tax reform is provided.
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- Majority-Rule Directions of Income Tax Reform and Second-Best Optimality
John A. Weymark
- Palgrave Macmillan UK
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