Budget Balancedness and Optimal Income Taxation
We make two 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. Copyright 2006 Blackwell Publishing, Inc..
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Volume (Year): 8 (2006)
Issue (Month): 3 (08)
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References listed on IDEAS
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- Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
- repec:cup:cbooks:9780521497695 is not listed on IDEAS
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- Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
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