The jointly optimal inflation tax, income tax structure, and transfers

Preston J. Miller

No 193, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: The welfare-maximizing income tax structure, rate of money creation, and amounts of intergenerational transfers are jointly determined for given rates of government consumption. When government consumption is zero, it is found for the parameter values examined that the income tax structure is progressive, the rate of money change is negative, and positive transfers are made to the old. As government consumption increases, the tax structure's progressivity declines and turns increasingly regressive, the rate of money change rises, and transfers decrease. It is found that the bulk of the increase in government consumption is optimally financed by a cut in transfers.

Keywords: Income tax; Expenditures, Public (search for similar items in EconPapers)
Date: 1995
New Economics Papers: this item is included in nep-mon, nep-pbe and nep-pub
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Published in Economic and Financial Modelling (Vol. 5, No. 4, Winter 1998, pp. 153-184)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmsr:193

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