NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Optimal Income Transfers

Louis Kaplow

NBER Working Paper No. 12284
Issued in June 2006
NBER Program(s):   PE

A substantial literature addresses the design of transfer programs and policies, including the negative income tax, other means-tested transfers, the earned income tax credit, categorical assistance, and work inducements. This work is largely independent of that on the optimal nonlinear income tax, yet formulations of such a tax necessarily address how low-income individuals should be treated. This paper draws on the optimal income taxation literature to illuminate the analysis of transfer programs, including the level and shape of marginal tax rates (including phase-outs), the structure of categorical assistance, and the role of work inducements in an optimal income transfer scheme.

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Document Object Identifier (DOI): 10.3386/w12284

Published: Louis Kaplow, 2007. "Optimal income transfers," International Tax and Public Finance, Springer, vol. 14(3), pages 295-325, June. citation courtesy of

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