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Budget Balancedness and Optimal Income Taxation

Author

Listed:
  • Marcus Berliant

    (Washington University in St. Louis)

  • Frank H. Page Jr.

    (University of Alabama)

Abstract

We make two main contributions to the theory of optimal income taxation. First, assuming conditions sufficient for existence of a Pareto optimal income tax and public goods mechanism, we show that if agents’ preferences satisfy an extended notion of single crossing called capacity constrained single crossing, then there exists a Pareto optimal income tax and public goods mechanism that is budget balancing. Second, we show that, even without capacity constrained single crossing, existence of a budget balancing, Pareto optimal income tax and public goods mechanism is guaranteed if the set of agent types contains no atoms.

Suggested Citation

  • Marcus Berliant & Frank H. Page Jr., 2004. "Budget Balancedness and Optimal Income Taxation," Public Economics 0407016, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwppe:0407016
    Note: Type of Document - pdf; pages: 44
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    References listed on IDEAS

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    6. Berliant, Marcus & Page, Frank Jr., 1996. "Incentives and income taxation: the implementation of individual revenue requirement functions," Ricerche Economiche, Elsevier, vol. 50(4), pages 389-400, December.
    7. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695.
    8. Berliant, Marcus & Page, Frank H, Jr, 2001. "Income Taxes and the Provision of Public Goods: Existence of an Optimum," Econometrica, Econometric Society, vol. 69(3), pages 771-784, May.
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    Cited by:

    1. Berliant, M. & Gouveia, M., 1991. "On Political Economy of Income Taxation," RCER Working Papers 288, University of Rochester - Center for Economic Research (RCER).
    2. Berliant, Marcus & Gouveia, Miguel, 2022. "On the Political Economy of Nonlinear Income Taxation," MPRA Paper 113140, University Library of Munich, Germany.
    3. Marcus Berliant & Pierre C. Boyer, 2022. "Politics and Income Taxes: Progress and Progressivity," CESifo Working Paper Series 10041, CESifo.

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    More about this item

    Keywords

    Optimal Income Taxation; Public Goods; Budget Balancing; Single Crossing; Nonatomic Economy; Atomless Economy;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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