Pareto‐Improving Tax Reforms and the Earned Income Tax Credit
提出识别帕累托改进税收改革的新方法，发现“两个税级就够了”，并用该方法评估1975年美国引入劳动所得税抵免的效果，发现该改革并非帕累托改进，但更广泛的收入补贴改革本可实现帕累托改进。
We develop a new approach for the identification of Pareto‐improving tax reforms. This approach yields necessary and sufficient conditions for the existence of Pareto‐improving reform directions. A main insight is that “Two brackets are enough”: When the system cannot be improved by altering tax rates in one or two income brackets, then there is no continuous reform direction that is Pareto‐improving. We also show how to check whether a given tax reform is Pareto‐improving. We use these tools to study the introduction of the Earned Income Tax Credit (EITC) in the United States in 1975. A robust finding is that, prior to the EITC, the U.S. tax‐transfer system was not Pareto‐efficient. Under plausible assumptions about behavioral responses, the 1975 reform was not Pareto‐improving. Qualitatively, though, it had the right properties: A similar reform with earnings subsidies made available to a broader range of incomes would have been Pareto‐improving.