Optimal Income Taxation: Mirrlees Meets Ramsey

Hitoshi Tsujiyama and Jonathan Heathcote

No 260, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: This paper offers a quantitative exploration of optimal income tax design in the Mirrlees tradition, and asks how nearly simple parametric tax functions can decentralize constrained efficient allocations. The environment features both observable and unobservable components of idiosyncratic labor productivity, and both public and private insurance. Given a social welfare function that rationalizes the amount of redistribution built into the current US tax code, we find that potential welfare gains from tax reform are very small. We also find that it is more important that the tax system features marginal tax rates that increase with income than that it feature universal lump-sum transfers.

Date: 2014
New Economics Papers: this item is included in nep-dge, nep-pbe and nep-pub
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Optimal Income Taxation: Mirrlees Meets Ramsey (2021)
Working Paper: Optimal Income Taxation: Mirrlees Meets Ramsey (2015)
Working Paper: Optimal Income Taxation: Mirrlees Meets Ramsey (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed014:260

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