Abstract: Paper No. 187
Placing a Lid on Marginal Tax Rates: A New Way to Simplify the Income Tax Structure
John M. Yinger
August 1997
Thanks to the phasing out of exemptions and excess itemized deductions
and to the alternative minimum tax, the federal income tax rate schedule
is difficult to draw, to understand, and to connect with any tax
principle. Moreover, some taxpayers now face unreasonably high marginal
tax rates. This paper proposes a new approach that simplifies the income
tax system at its point of intersection with taxpayers; sets absolute
upper and lower bounds on true marginal tax rates; and allows for the
phasing out of any or all exemptions, deductions, or other tax preferences
according to clear principles. This approach can achieve any desired
degree of progressivity.
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