My post on bracket creep brought up some discussion of the idea of a smooth tax curve in place of the piecewise linear one we have now.
I’ve long thought this was a good idea and I have what I think is a neat way to implement it. Instead of providing a table that lets taxpayers calculate their tax payment in one step at present (take the tax payable at the threshold below actual income and apply the marginal rate to income above the threshold), I’d provide a similar mechanism to enable calculation of the average tax rate which would increase linearly between threshold points, just like total tax in the current system. Calculating the tax payable takes one more step – multiplying income by the average tax rate.
The big merit of this it that it focuses attention on the variable relevant to social choices about tax – the average tax rate, rather than on the marginal tax rate, although you can still calculate the latter if you’re so inclined.