Tax Policy and the Design of Tax Models: Greater Simplicity, Greater Progressivity. The Case of the Bracket System in the Income Tax

Abstract

The paper examines the relationship between simplicity and progressivity in tax system design, using Optimal Tax Theory as its analytical framework and a comparative analysis of personal income tax systems in the United Kingdom, Spain, and Venezuela. The author argues that simplicity is not an end in itself but a means to achieve policy goals such as equity and progressivity, and demonstrates that a greater number of tax brackets does not necessarily result in greater effective progressivity. The comparative analysis shows that simpler systems, when properly designed and supported by meaningful tax-free thresholds and coherent marginal rates, can achieve stronger progressivity than more complex structures. The paper also highlights how inflation, particularly in the Venezuelan case, can distort formal progressivity and transform a nominally progressive system into a regressive one in real terms. Ultimately, the study concludes that the goal of tax policy should not be to eliminate complexity entirely, but to manage and justify it in light of legitimate public policy objectives.