Optimal Marginal Tax Rates for Low Incomes: Positive, Negative, or Zero?

Stefan Homburg

Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät

Abstract: Previous studies have shown that the optimal marginal tax rate at the bottom of the income distribution may be positive, negative, or even zero. This paper reexamines this problem in a unified framework and tries to evaluate the arguments. It turns out that the case for positive marginal tax rates is quite strong, whereas negative marginal tax rates seem to be based on a misconception.

Keywords: Optimal income taxation; contract theory; incentives; welfare (search for similar items in EconPapers)
JEL-codes: D3 H2 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2002-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:han:dpaper:dp-255

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