IDEAS home Printed from https://ideas.repec.org/a/sae/pubfin/v4y1976i1p3-15.html
   My bibliography  Save this article

Income Tax, Wage Tax, and Optimal Tax

Author

Listed:
  • Eitan Berglas

    (Tel-Aviv University and University of Rochester)

Abstract

Recent studies find wage subsidies (WS) to be superior to negative income tax (NIT). However, these studies suffer from a serious aggregation problem. A model is suggested in which these aggregation problems are avoided. In this model there exists a WS schedule that increases labor supply compared with an equally costly NIT. However, the WS may be Pareto inferior. Furthermore, for high income workers given any income tax system it is always possible to find a wage tax system which both is Pareto superior and increases labor supply. The merits of the model and its implications for other optimal income tax studies are critically discussed.

Suggested Citation

  • Eitan Berglas, 1976. "Income Tax, Wage Tax, and Optimal Tax," Public Finance Review, , vol. 4(1), pages 3-15, January.
    • Handle: RePEc:sae:pubfin:v:4:y:1976:i:1:p:3-15
    DOI: 10.1177/109114217600400101
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/109114217600400101
    Download Restriction: no
    File URL: https://libkey.io/10.1177/109114217600400101?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(2), pages 175-208.
    2. Garfinkel, Irwin, 1973. "A Skeptical Note on "The Optimality" of Wage Subsidy Programs," American Economic Review, American Economic Association, vol. 63(3), pages 447-453, June.
    3. Zeckhauser, Richard J, 1971. "Optimal Mechanisms for Income Transfer," American Economic Review, American Economic Association, vol. 61(3), pages 324-334, June.
    4. Browning, Edgar K, 1973. "Alternative Programs for Income Redistribution: The NIT and the NWT," American Economic Review, American Economic Association, vol. 63(1), pages 38-49, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christian Morrisson & Philippe Cazenave, 1973. "Fonctions d'utilité interdépendantes et théorie de la redistribution en économie de production," Revue Économique, Programme National Persée, vol. 24(5), pages 725-760.
    2. R. D. Husby, 1993. "The Minimum Wage, Wage Subsidies, And Poverty," Contemporary Economic Policy, Western Economic Association International, vol. 11(3), pages 30-38, July.
    3. Moffitt, Robert A., 2002. "Welfare programs and labor supply," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 34, pages 2393-2430, Elsevier.
    4. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(3), pages 1039-1073.
    5. Casey Mulligan & Tomas Philipson, "undated". "Merit Motives and Government Intervention: Public Finance in Reverse," University of Chicago - Population Research Center 2000-03, Chicago - Population Research Center.
    6. Browning, Edgar K., 1995. "Effects of the Earned Income Tax Credit on Income and Welfare," National Tax Journal, National Tax Association;National Tax Journal, vol. 48(1), pages 23-43, March.
    7. Huizinga, H.P., 1996. "Unemployment Benefits and Redistributive Taxes in the Presence of Labor Quality Externalities," Other publications TiSEM 460a1387-fe15-4f62-b8a6-8, Tilburg University, School of Economics and Management.
    8. Robert A. Moffitt, 2003. "The Temporary Assistance for Needy Families Program," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 291-364, National Bureau of Economic Research, Inc.
    9. Wane, Waly, 2001. "The optimal income tax when poverty is a public 'bad'," Journal of Public Economics, Elsevier, vol. 82(2), pages 271-299, November.
    10. Browning, Edgar K., 1995. "Effects of the Earned Income Tax Credit on Income and Welfare," National Tax Journal, National Tax Association, vol. 48(1), pages 23-43, March.
    11. Blumkin, Tomer & Sadka, Efraim & Shem-Tov, Yotam, 2011. "Labor Migration and the Case for Flat Tax," Foerder Institute for Economic Research Working Papers 275759, Tel-Aviv University > Foerder Institute for Economic Research.
    12. Roozbeh Hosseini & Larry E. Jones & Ali Shourideh, 2009. "Risk Sharing, Inequality and Fertility," NBER Working Papers 15111, National Bureau of Economic Research, Inc.
    13. Hellwig, Christian & Werquin, Nicolas, 2022. "A Fair Day's Pay for a Fair Day's Work: Optimal Tax Design as Redistributional Arbitrage," TSE Working Papers 22-1284, Toulouse School of Economics (TSE), revised Jan 2023.
    14. Karin Mayr, 2003. "Immigration and Majority Voting on Income Redistriubtion-Is there a Case for Opposition from Natives?," Economics working papers 2003-08, Department of Economics, Johannes Kepler University Linz, Austria.
    15. Andreas Pollak, 2008. "Optimal Unemployment Insurance with Variable Skill Levels," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(4), pages 696-726, December.
    16. Kenneth Judd & Scott E. Page, 2004. "Computational Public Economics," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(2), pages 195-202, May.
    17. Andrea Attar & Thomas Mariotti & François Salanié, 2020. "The Social Costs of Side Trading," The Economic Journal, Royal Economic Society, vol. 130(630), pages 1608-1622.
    18. Stefanie Stantcheva, 2020. "Dynamic Taxation," Annual Review of Economics, Annual Reviews, vol. 12(1), pages 801-831, August.
    19. Antinolfi, Gaetano & Azariadis, Costas & Bullard, James, 2016. "The Optimal Inflation Target In An Economy With Limited Enforcement," Macroeconomic Dynamics, Cambridge University Press, vol. 20(2), pages 582-600, March.
    20. Bas Jacobs, 2013. "Optimal redistributive tax and education policies in general equilibrium," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(2), pages 312-337, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:4:y:1976:i:1:p:3-15. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.