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On the Efficiency of Equal Sacrifice Income Tax Schedules

  • Costa, Carlos Eugênio
  • Pereira, Thiago
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    In an economy which primitives are exactly those in Mirrlees (1971), we investigate the efficiency of labor income tax schedules derived under the equal sacrifice principle. Starting from a given government revenue level, we useWerning’s (2007b) approach to assess whether there is an alternative tax schedule to the one derived under the equal sacrifice principle that raises more revenue while delivering less utility to no one. For our preferred parametrizations of the problem we find that inefficiency only arises at very high levels of income. We also show how the multipliers of the Pareto problem may be extracted from the data and used to find the implicit marginal social weights associated with each level of income.

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    File URL: http://bibliotecadigital.fgv.br/dspace/bitstream/10438/10753/3/On-the-Efficiency-of-Equal-Sacrifice-Income-Tax-Schedules-.pdf
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    Paper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 741.

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    Date of creation: 18 Apr 2013
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    Handle: RePEc:fgv:epgewp:741
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    1. Louis Kaplow & Steven Shavell, 2001. "Any Non-welfarist Method of Policy Assessment Violates the Pareto Principle," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 281-286, April.
    2. Berliant, M. & Gouveia, M., 1990. "Equal Sacrifice And Incentive Compatible Income Taxation," RCER Working Papers 219, University of Rochester - Center for Economic Research (RCER).
    3. Mill, John Stuart, 1874. "Essays on Some Unsettled Questions of Political Economy," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 2, number mill1874.
    4. Weinzierl, Matthew, 2014. "The promise of positive optimal taxation: normative diversity and a role for equal sacrifice," Journal of Public Economics, Elsevier, vol. 118(C), pages 128-142.
    5. Iván Werning, 2007. "Optimal Fiscal Policy with Redistribution," The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 925-967, 08.
    6. repec:cup:cbooks:9780521629560 is not listed on IDEAS
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