An effective way of coordinating tax and income policies

Abstract

This paper intends to demonstrate the necessity of coordinating the tax and
incomes policies and to suggest an effective way to accoplish this. We start by
showing, specifically, how taxes on the one hand and wages - prices on the other
are interrelated. There follows a calculation of wage m u l t i p l i e r s , based
on the 1988 tax schedule for personal income tax (P.I.T) in Greece, as well as
of the r e q u i r e d wage i n c r e a s e s for each income bracket in order to
guarantee that for 1989 the real disposable income (R.D.I) of wage-earners does
not deteriorate. Next, the impact of P.I.T on wages is estimated using wage
equations. Finally, we present a workable mechanism to achieve the coordination
of tax and incomes policies in practice. In this way we hope to have given a
satisfactory answer to a hitherto unsolved problem.