Optimal Tax Problems with Multidimensional Heterogeneity: A Mechanism Design Approach

Laurence Jacquet and Etienne Lehmann ()

No 8871, CESifo Working Paper Series from CESifo

Abstract: We propose a new method, that we call an allocation perturbation, to derive the optimal nonlinear income tax schedules with multidimensional individual characteristics on which taxes cannot be conditioned. It is well established that, when individuals differ in terms of preferences on top of their skills, optimal marginal tax rates can be negative. In contrast, we show that with heterogeneous behavioral responses and skills, one has optimal positive marginal tax rates, under utilitarian preferences and maximin.

Keywords: optimal taxation; mechanism design; multidimensional screening problems; allocation perturbation (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-des, nep-pbe, nep-pub and nep-upt
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Related works:
Journal Article: Optimal tax problems with multidimensional heterogeneity: a mechanism design approach (2023)
Working Paper: Optimal tax problems with multidimensional heterogeneity: A mechanism design approach (2021)
Working Paper: Optimal tax problems with multidimensional heterogeneity: A mechanism design approach (2021)
Working Paper: Optimal tax problems with multidimensional heterogeneity: a mechanism design approach (2021)
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