Pareto Efficient Tax Structures
Most analyses of optimal income taxation make restrictive technical assumptions on preferences (such as single-crossing) and only derive properties of welfare-maximizing tax schedules. Here, for an economy with any finite numbers of groups and commodities, Pareto efficient tax structures are described assuming only continuity and monotonicity of preference. Most results follow directly from a property of self-selection: at an optimum, one group will never envy the bundle of another group which pays a larger total tax. The bundle of a group paying the largest total tax is undistorted. Assuming normality, undistorted outcomes for a group form a connected segment on the constrained utility possibility frontier. The tax structure at distorted outcomes is also described. Copyright 1990 by Royal Economic Society.
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Volume (Year): 42 (1990)
Issue (Month): 1 (January)
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References 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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NBER Working Papers
0632, National Bureau of Economic Research, Inc.
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3289, National Bureau of Economic Research, Inc.
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CEPREMAP Working Papers (Couverture Orange)
- Sadka, Efraim, 1976. "On Income Distribution, Incentive Effects and Optimal Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 261-67, June.
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