Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 5/2010: Optimal Labor Income Taxation under Maximin: An Upper Bound.

Laurence Jacquet ()
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Laurence Jacquet: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway

Abstract: This paper assumes the standard optimal income tax model of Mirrlees (Review of Economic Studies, 1971). It gives fairly mild conditions under which the optimal nonlinear labor income tax profile derived under maximin has higher marginal tax rates than the ones derived with welfarist criteria that sum over the population any concave transformation of individual utilities. This strict dominance result is always valid close to the bounds of the skill distribution and almost everywhere (except at the upper bound) when quasilinear-in-consumption preferences are assumed.

Keywords: Optimal income taxation; maximin.

JEL-codes: H21

9 pages, February 2, 2010

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