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A Note on Nonlinear Income Taxes and the Utility Possibility Set

Author

Listed:
  • Tommy Andersson

    (Department of Economics, Lund University)

Abstract

This note analyzes constrained Pareto efficient nonlinear income tax schedules that are monotonic chains to the left. The main result demonstrates that if all individuals have a positive consumption at the tax schedule that maximizes the utility of the worst-off individual, then the constrained utility possibility set is convex. As a consequence, all constrained Pareto efficient nonlinear income tax schedules that are monotonic chains to the left can be identified by maximizing a weighted summation of net utilities.

Suggested Citation

  • Tommy Andersson, 2007. "A Note on Nonlinear Income Taxes and the Utility Possibility Set," Economics Bulletin, AccessEcon, vol. 8(5), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-07h20002
    as

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    References listed on IDEAS

    as
    1. Lollivier, Stefan & Rochet, Jean-Charles, 1983. "Bunching and second-order conditions: A note on optimal tax theory," Journal of Economic Theory, Elsevier, vol. 31(2), pages 392-400, December.
    2. Tommy Andersson, 2007. "Nonlinear taxation and punishment," International Journal of Economic Theory, The International Society for Economic Theory, vol. 3(1), pages 47-56, March.
    3. Ebert, Udo, 1992. "A reexamination of the optimal nonlinear income tax," Journal of Public Economics, Elsevier, vol. 49(1), pages 47-73, October.
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    5. Weymark, John A., 1986. "A reduced-form optimal nonlinear income tax problem," Journal of Public Economics, Elsevier, vol. 30(2), pages 199-217, July.
    6. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    7. Weymark, John A, 1987. "Comparative Static Properties of Optimal Nonlinear Income Taxes," Econometrica, Econometric Society, vol. 55(5), pages 1165-1185, September.
    8. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(2), pages 175-208.
    Full references (including those not matched with items on IDEAS)

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    JEL classification:

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

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