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Optimal marginal and average income taxation under maximin

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  • Boadway, Robin
  • Jacquet, Laurence

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.

Suggested Citation

  • Boadway, Robin & Jacquet, Laurence, 2008. "Optimal marginal and average income taxation under maximin," Journal of Economic Theory, Elsevier, vol. 143(1), pages 425-441, November.
  • Handle: RePEc:eee:jetheo:v:143:y:2008:i:1:p:425-441
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    Keywords

    Maximin Optimal income taxation;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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