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Gini index = 0 refers to an economy where gross income has been redistributed so that all income earners in the United States received the same income, equal to the most current measure of the mean (not median) personal income in the United States. That is, the aggregate personal income will remain unchanged.

We'll assume the Federal income tax brackets remain the same as in 2015.

Given the above assumptions, will Federal tax revenue increase or decrease compared with the present day income distribution, and by how much?

Bonus question: Is there an optimal distribution of gross incomes in the United States working population that maximizes Federal income taxes?

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  • $\begingroup$ This depends completely on how the gross income was redistributed. E.g. if it was redistributed after via additional taxes and subsidies in such a way as to leave the net tax income on a level equal to the 2015 level it would be unchanged. If you achieve redistribution by reallocating jobs, assets, etc. then it depends on how you do that, etc. So right now there is no clear answer to this question. (Perhaps with a lot of additional details there may be one.) $\endgroup$ – Giskard Aug 17 '16 at 20:23
  • $\begingroup$ @denesp Right, I've purposefully left the method of income redistribution unspecified, although we can assume it isn't via higher taxes on the rich. Basically, I'm curious if in an "ideal" economy where there is no income disparity, with all other things being held equal, how would the tax revenue change? Certainly many more low income people would be lifted into higher income tax brackets (= more tax revenue), but we'd also see a smaller number of extremely wealthy individuals who are now in lower tax brackets (= less tax revenue). $\endgroup$ – RobertF Aug 17 '16 at 20:40
  • $\begingroup$ I see. So hypothetical country which has a Gini index of 0, aggregate income equal to the US and the same tax brackets. Question: How is tax revenue in this country compared to the US. $\endgroup$ – Giskard Aug 17 '16 at 21:22

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