On the efficiency of equal sacrifice income tax schedules

Carlos Eugênio da Costa () and Thiago Neves Pereira

No 741, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: In an economy which primitives are exactly those in Mirrlees (1971), we investigate the efficiency of labor income tax schedules derived under the equal sacrifice principle. Starting from a given government revenue level, we use Werning’s (2007b) approach to assess whether there is an alternative tax schedule to the one derived under the equal sacrifice principle that raises more revenue while delivering less utility to no one. For our preferred parametrizations of the problem we find that inefficiency only arises at very high levels of income. We also show how the multipliers of the Pareto problem may be extracted from the data and used to find the implicit marginal social weights associated with each level of income.

Date: 2013-04-18
New Economics Papers: this item is included in nep-pbe and nep-pub
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Journal Article: On the efficiency of equal sacrifice income tax schedules (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgewp:741

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