Higher tax for top earners

Felix FitzRoy; Jim Jin

Higher tax for top earners

Research output: Working paper › Discussion paper

Abstract

The literature can justify increasing and decreasing marginal taxes (IMT & DMT) on top income under different social objectives and income distributions. Even if DMT are optimal, they are often politically infeasible. Then a flat tax seems to be a constrained optimal solution. We show however that, if we want to maximize the utility of a poor majority any flat tax can be inferior to some IMT. We provide a sufficient condition for (two-band) IMT to dominate any flat tax and further generalize this result to allow different welfare weights, declining elasticity of labour supply and more tax bands.

Original language	English
Place of Publication	St Andrews
Publisher	University of St Andrews
Number of pages	25
Publication status	Published - Feb 2017

Publication series

Name	School of Economics and Finance Discussion Paper
Publisher	University of St Andrews
No.	1702
ISSN (Print)	0962-4031
ISSN (Electronic)	2055-303X

Keywords

Flat tax
Increasing marginal taxes
Income redistribution

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Jin_EconDiscPap_1702.pdf
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Final published version, 485 KB

Cite this

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KW - Increasing marginal taxes

KW - Income redistribution

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Higher tax for top earners

Abstract

Publication series

Keywords

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