On the Efficiency of Equal Sacrifice Income Tax Schedules
AbstractIn an economy which primitives are exactly those in Mirrlees (1971), we investigatethe efficiency of labor income tax schedules derived under the equal sacrifice principle.Starting from a given government revenue level, we useWerning’s (2007b) approach toassess whether there is an alternative tax schedule to the one derived under the equalsacrifice principle that raises more revenue while delivering less utility to no one. Forour preferred parametrizations of the problem we find that inefficiency only arises atvery high levels of income. We also show how the multipliers of the Pareto problemmay be extracted from the data and used to find the implicit marginal social weightsassociated with each level of income.
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Date of creation: 18 Apr 2013
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-27 (All new papers)
- NEP-PBE-2013-04-27 (Public Economics)
- NEP-PUB-2013-04-27 (Public Finance)
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