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Budget Balancedness and Optimal Income Taxation

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  • Berliant, Marcus
  • Page Jr., Frank H.

Abstract

We make two main contributions to the theory of optimal income taxation. First, assuming conditions sufficient for existence of a Pareto optimal income tax and public goods mechanism, we show that if, in addition, agents' preferences satisfy an extended notion of single crossing called capacity constrained single crossing, then there exists a Pareto optimal income tax and public goods mechanism that is budget balancing . Second, we show that, even without capacity contrained single crossing, existence of a , Pareto optimal income tax and public goods mechanism is guaranteed if the set of agent types contains no atoms.

Suggested Citation

  • Berliant, Marcus & Page Jr., Frank H., 2003. "Budget Balancedness and Optimal Income Taxation," Working Papers 1164, California Institute of Technology, Division of the Humanities and Social Sciences.
    • Handle: RePEc:clt:sswopa:1164
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    Cited by:

    1. Berliant, M. & Gouveia, M., 1991. "On Political Economy of Income Taxation," RCER Working Papers 288, University of Rochester - Center for Economic Research (RCER).
    2. Marcus Berliant & Pierre C. Boyer, 2024. "Politics and income taxes: Progress and progressivity," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 26(4), August.
    3. Berliant, Marcus & Gouveia, Miguel, 2022. "On the Political Economy of Nonlinear Income Taxation," MPRA Paper 113140, University Library of Munich, Germany.

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    More about this item

    Keywords

    optimal income taxation; budget balancedness; mechanism design; implementation;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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