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Optimal income taxation and the shape of average tax rates

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  • HINDRIKS, Jean
  • LEHMANN, Etienne
  • PARMENTIER, Alexis

Abstract

We investigate whether the optimal income tax model of Mirrlees (1971) can reproduce the empirically observed increasing average tax rates. We give a necessary condition and exhibit two examples where the optimal average tax rates are increasing. We wish to thank Mathias Hungerbühler and Laurence Jacquet for stimulating discussions. Citation: HINDRIKS, Jean, Etienne LEHMANN, and Alexis PARMENTIER, (2006) "Optimal income taxation and the shape of average tax rates.
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Suggested Citation

  • HINDRIKS, Jean & LEHMANN, Etienne & PARMENTIER, Alexis, 2006. "Optimal income taxation and the shape of average tax rates," CORE Discussion Papers RP 1860, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:1860
    Note: In : Economics Bulletin, 8(2), 1-6, 2006
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    References listed on IDEAS

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    1. Boadway, Robin & Cuff, Katherine & Marchand, Maurice, 2000. " Optimal Income Taxation with Quasi-linear Preferences Revisited," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 2(4), pages 435-460.
    2. Emmanuel Saez, 2001. "Using Elasticities to Derive Optimal Income Tax Rates," Review of Economic Studies, Oxford University Press, vol. 68(1), pages 205-229.
    3. Immervoll, Herwig, 2004. "Average and marginal effective tax rates facing workers in the EU: a micro-level analysis of levels, distributions and driving factors (revised version of EM2/02)," EUROMOD Working Papers EM6/04, EUROMOD at the Institute for Social and Economic Research.
    4. Diamond, Peter A, 1998. "Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates," American Economic Review, American Economic Association, vol. 88(1), pages 83-95, March.
    5. Jesus Seade, 1982. "On the Sign of the Optimum Marginal Income Tax," Review of Economic Studies, Oxford University Press, vol. 49(4), pages 637-643.
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    Cited by:

    1. Lehmann, Etienne & Parmentier, Alexis & Van Der Linden, Bruno, 2011. "Optimal income taxation with endogenous participation and search unemployment," Journal of Public Economics, Elsevier, vol. 95(11), pages 1523-1537.
    2. 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.
    3. Soumyanetra Munshi, 2011. "On existence of pure strategy equilibrium with endogenous income," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 37(1), pages 1-37, June.

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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