The Optimal Income Tax When Poverty Is a Public "Bad"

The Optimal Income Tax When Poverty Is a Public "Bad"

The author considers poverty as an aggregate negative externality that affects people in different ways, depending on their aversion to poverty. If society is on average averse to poverty, then the optimal income tax schedule displays negative marg...

Full description

Bibliographic Details
Main Author: Wane, Waly
Format: Policy Research Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2014
Subjects:
ASYMMETRIC INFORMATION
BENCHMARK
CONSUMERS
CONSUMPTION FUNCTION
CONSUMPTION LEVELS
CUMULATIVE DISTRIBUTION
CUMULATIVE DISTRIBUTION FUNCTION
DENSITY FUNCTION
DEVELOPMENT RESEARCH
DISPOSABLE INCOME
ECONOMICS LITERATURE
EXPLOITATION
EXTERNALITIES
EXTERNALITY
GINI INDEX
HEADCOUNT RATIO
HIGH POVERTY
INCENTIVE EFFECTS
INCOME
INCOME POVERTY
INDIFFERENCE CURVES
LABOR SUPPLY
LEISURE
MARGINAL COST
MARGINAL TAX
MARGINAL TAX RATE
MARGINAL TAX RATES
MULTIPLIERS
NEGATIVE EFFECT
OPPORTUNITY COST
POLICY ANALYSIS
POLICY RESEARCH
POOR AREAS
POOR INDIVIDUALS
POOR PEOPLE
POOR POPULATION
POSITIVE EFFECTS
POVERTY LEVELS
POVERTY LINE
POVERTY LINES
POVERTY MEASURE
POVERTY MEASURES
POVERTY REDUCTION
PRIVATE INFORMATION
PRODUCTIVITY
PUBLIC FUNDS
PUBLIC GOOD
PUBLIC POLICY
SKILLED WORKERS
SOCIAL COSTS
SOCIAL WELFARE
TAX REFORM
TAXATION
UNEMPLOYMENT
UTILITY FUNCTION
UTILITY FUNCTIONS
VALUATION
WELFARE ECONOMICS
WELFARE FUNCTION
WORKING POOR
Online Access:http://documents.worldbank.org/curated/en/2000/01/439012/optimal-income-tax-poverty-public-bad
http://hdl.handle.net/10986/19854
Description
Summary:The author considers poverty as an aggregate negative externality that affects people in different ways, depending on their aversion to poverty. If society is on average averse to poverty, then the optimal income tax schedule displays negative marginal tax rates, at least for less skilled individuals. Negative marginal tax rates play the role of a Pigouvian earnings subsidy, fostering the supply of poor individuals to provide labor. The result of no distortion at the endpoints, which is therefore violated, can be restored once the focus is shifted from individual to social distortions.

Similar Items