Optimal Taxation with Multiple Incomes and Types

Kevin Spiritus, Etienne Lehmann (), Sander Renes and Floris Zoutman

No 9534, CESifo Working Paper Series from CESifo

Abstract: We analyze the optimal nonlinear income tax schedule when taxpayers earn multiple incomes and differ along many unobserved dimensions. We derive the necessary conditions for the government’s optimum using both a tax perturbation and a mechanism design approach, and show that both methods produce the same results. Our main contribution is to propose a numerical method to find the optimal tax schedule. Applied to the optimal taxation of couples, we find that optimal isotax curves are very close to linear and parallel. The slope of isotax curves is strongly affected by the relative tax-elasticity of male and female income. We make several additional contributions, including a test for Pareto efficiency and a condition on primitives that ensures the government’s necessary conditions are sufficient and the solution to the problem is unique.

Keywords: nonlinear optimal taxation; multidimensional screening; household income taxation (search for similar items in EconPapers)
JEL-codes: D82 H21 H23 H24 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Optimal taxation with multiple incomes and types (Forthcoming)
Working Paper: Optimal Taxation with Multiple Incomes and Types (2023)
Working Paper: Optimal Taxation with Multiple Incomes and Types (2022)
Working Paper: Optimal Taxation with Multiple Incomes and Types (2022)
Working Paper: Optimal Taxation with Multiple Incomes and Types (2022)
Working Paper: Optimal Taxation with Multiple Incomes and Types (2022)
Working Paper: Optimal Taxation with Multiple Incomes and Types
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