On the Analysis of the Efficiency of a Piecewise-Linear Model for Progressive Taxation

Abstract

The article presents the authors’ ideas regarding the measurement of the effectiveness of the proposed modernized version of the progressive taxation scale.
The comparative statistical and economic analysis of taxation of individuals carried out in the article showed that in most countries with developed market economies, a progressive taxation scale is used, which allows taking into account population ability to pay and the established subsistence minimum. At present, Russia is practically one of the developed countries in which a flat scale has remained. But recently, in our country, measures are being taken to introduce some elements of progressive taxation. The paper also shows that a significant drawback of the progressive scale used in different countries is the abrupt change in the size of the tax. It is proposed that, the so-called «piecewise-linear» model of the progressive taxation scale that from the taxpayer’s perspective is fairer, be used.
Using statistical data, the authors demonstrated the advantages of the proposed «piece-wise-linear» model of the progressive taxation scale in comparison with the «flat» scale. The «piecewise linear» scale proposed in the study will allow individuals (taxpayers) to make an easier transition to a progressive tax rate. To assess the effectiveness of the proposed version of the «piecewise-linear» taxation scale, an economic and mathematical model has been developed, which implies tax exemption for persons with incomes below the subsistence level and an increase in the tax rate, compared to the existing one, for persons with large incomes. The model was tested on data of Rosstat on the income of individuals.
The introduction of «piecewise-linear» taxation scale will, in authors’ opinion, increase tax collection and more fully implement the distribution function of taxation, which will ultimately stimulate the development of the economy and social sphere.