Higher tax for top earners
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.
Citation
FitzRoy , F R & Jin , J Y 2017 , ' Higher tax for top earners ' , Journal of Economics , vol. 122 , no. 2 , pp. 121-136 . https://doi.org/10.1007/s00712-017-0557-1
Publication
Journal of Economics
Status
Peer reviewed
ISSN
0931-8658Type
Journal article
Rights
© The Author(s) 2017 This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
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