NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Variable Earnings and Nonlinear Taxation

Michael Rothschild, Robert Moffitt

NBER Working Paper No. 1163 (Also Reprint No. r0965)*
Issued in 1988
NBER Program(s):   PE

We explore the interaction between two facts. The first is that income is variable; the second is that the tax and transfer system transforms before tax income into after tax income in highly non-linear ways. The effect is to penalize (and reward) income variability in a manner which is both substantial and capricious.

*Published: Moffitt, Robert and Michael Rothschild. "Variable Earnings and Nonlinear Taxation," Journal of Human Resources, Vol. 22, No. 3, Summer 1987, pp. 405- 421.

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