Abstract
This paper shows that the Mirrlees-Seade conditions of agent monotonicity and noninferiority of leisure imply the positivity of the optimal marginal income tax rate in Sheshinski's model of linear income taxation as well as in the general model. The optimal marginal tax rate is bounded above by the Rawlsian rate, which in turn is bounded by the revenue-maximizing rate. The optimal marginal tax rate may be arbitrarily close to the Rawlsian rate. However, the optimal marginal tax rate is bounded away from the revenue-maximizing rate whenever the individual with the lowest ability works.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.