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This is called means testing, and it's a poor way to design policy because it creates step functions and breakpoints, distorting the market.
by sooheon 2y ago
This is called means testing, and it's a poor way to design policy because it creates step functions and breakpoints, distorting the market.
- scythe 2y agoThe tax I described is not a step function. It is a ramp function. By your definition, the progressive income tax would also be "means testing".
- sooheon 2y agoWhat you described ("minimum value that is not taxed...") is the definition of a step function. But yes, binned income brackets is also a form of means testing, and a poor way to design taxes.