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Higher Tax for Top Earners

Author

Listed:
  • Felix FitzRoy

    (University of St Andrews)

  • Jim Jin

    (University of St Andrews)

Abstract

The literature can justify both increasing and decreasing marginal taxes (IMT & DMT) on top incomes under different welfare objectives and income distributions. Even when DMT are theoretically optimal, they are often politically infeasible. Then a flat tax seems to be a constrained optimal solution. We show however that, given any flat tax we can increase the total utility of a poor majority by raising the top income tax rate under a simple condition, which can be checked with empirical data. We further generalize our main results allowing different welfare weights, declining elasticity of labor supply and more tax bands.

Suggested Citation

  • Felix FitzRoy & Jim Jin, 2017. "Higher Tax for Top Earners," Journal of Economics, Springer, vol. 122(2), pages 121-136, October.
    • Handle: RePEc:kap:jeczfn:v:122:y:2017:i:2:d:10.1007_s00712-017-0557-1
    DOI: 10.1007/s00712-017-0557-1
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    References listed on IDEAS

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    Cited by:

    1. Corneo, Giacomo, 2018. "Time-poor, working, super-rich," European Economic Review, Elsevier, vol. 101(C), pages 1-19.

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    More about this item

    Keywords

    Flat tax; Piecewise linear taxes; Income redistribution;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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