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Optimal marginal and average income taxation under maximin

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Author Info
Boadway, Robin
Jacquet, Laurence

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Abstract

Using the Mirrlees optimal income tax model under maximin, we derive fairly mild conditions for a decreasing marginal tax rate throughout the skill distribution with no bunching, a strictly concave tax function in income and a single-peaked average tax schedule. Assuming additive preferences and an isoelastic disutility of labor function, these tax profiles are implied by aggregate skills that are non-decreasing with the skill level. If preferences are quasilinear in leisure or in consumption, these tax profiles are also obtained under a large set of skill distributions.

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Publisher Info
Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 143 (2008)
Issue (Month): 1 (November)
Pages: 425-441
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Handle: RePEc:eee:jetheo:v:143:y:2008:i:1:p:425-441

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Web page: http://www.elsevier.com/locate/inca/622869

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Keywords: Maximin Optimal income taxation;

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References listed on IDEAS
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  1. Momi Dahan & Michel Strawczynski, 2000. "Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates: Comment," American Economic Review, American Economic Association, vol. 90(3), pages 681-686, June. [Downloadable!] (restricted)
  2. Sadka, Efraim, 1976. "On Income Distribution, Incentive Effects and Optimal Income Taxation," Review of Economic Studies, Blackwell Publishing, vol. 43(2), pages 261-67, June. [Downloadable!] (restricted)
  3. Robin Boadway & Katherine Cuff & Maurice Marchand, 1999. "Optimal Income Taxation With Quasi-Linear Preferences Revisited," Working Papers 984, Queen's University, Department of Economics. [Downloadable!]
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  4. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December. [Downloadable!] (restricted)
  5. Phelps, Edmund S, 1973. "Taxation of Wage Income for Economic Justice," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 331-54, August. [Downloadable!] (restricted)
  6. Jon Gruber & Emmanuel Saez, 2000. "The Elasticity of Taxable Income: Evidence and Implications," NBER Working Papers 7512, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Lollivier, Stefan & Rochet, Jean-Charles, 1983. "Bunching and second-order conditions: A note on optimal tax theory," Journal of Economic Theory, Elsevier, vol. 31(2), pages 392-400, December. [Downloadable!] (restricted)
  8. Ebert, Udo, 1992. "A reexamination of the optimal nonlinear income tax," Journal of Public Economics, Elsevier, vol. 49(1), pages 47-73, October. [Downloadable!] (restricted)
  9. Kanbur, Ravi & Tuomala, Matti, 1994. " Inherent Inequality and the Optimal Graduation of Marginal Tax Rates," Scandinavian Journal of Economics, Blackwell Publishing, vol. 96(2), pages 275-82.
  10. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Blackwell Publishing, vol. 38(114), pages 175-208, April. [Downloadable!] (restricted)
  11. Weymark, John A, 1987. "Comparative Static Properties of Optimal Nonlinear Income Taxes," Econometrica, Econometric Society, vol. 55(5), pages 1165-85, September. [Downloadable!] (restricted)
  12. Weymark, John A., 1986. "A reduced-form optimal nonlinear income tax problem," Journal of Public Economics, Elsevier, vol. 30(2), pages 199-217, July. [Downloadable!] (restricted)
  13. Saez, Emmanuel, 2001. "Using Elasticities to Derive Optimal Income Tax Rates," Review of Economic Studies, Blackwell Publishing, vol. 68(1), pages 205-29, January.
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  14. Chander, Parkash & Wilde, Louis L, 1998. "A General Characterization of Optimal Income Tax Enforcement," Review of Economic Studies, Blackwell Publishing, vol. 65(1), pages 165-83, January. [Downloadable!] (restricted)
  15. Diamond, Peter A, 1998. "Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates," American Economic Review, American Economic Association, vol. 88(1), pages 83-95, March. [Downloadable!] (restricted)
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  16. Daniel Feenberg & James Poterba, 1993. "Income Inequality and the Incomes of Very High Income Taxpayers: Evidence from Tax Returns," NBER Working Papers 4229, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Jean HINDRIKS & Etienne LEHMANN & Alexis PARMENTIER, 2006. "Optimal income taxation and the shape of average tax rates," Economics Bulletin, Economics Bulletin, vol. 8(2), pages 1-6. [Downloadable!]
  18. Atkinson, A. B., 1990. "Public economics and the economic public," European Economic Review, Elsevier, vol. 34(2-3), pages 225-248, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alan Krause, 2008. "Optimal Nonlinear Income Taxation with Learning-by-Doing," Discussion Papers 08/08, Department of Economics, University of York. [Downloadable!]
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