 Structure of the optimal income tax in the quasi‐linear modelNigar Hashimzade and Gareth Myles () International Journal of Economic Theory, 2007, vol. 3, issue 1, 5-33 Abstract: Existing numerical characterizations of the optimal income tax have been based on a limited number of model specifications. As a result, they do not reveal which properties are general. We determine the optimal tax in the quasi‐linear model under weaker assumptions than have previously been used; in particular, we remove the assumption of a lower bound on the utility of zero consumption and the need to permit negative labor incomes. A Monte Carlo analysis is then conducted in which economies are selected at random and the optimal tax function constructed. The results show that in a significant proportion of economies the marginal tax rate rises at low skills and falls at high. The average tax rate is equally likely to rise or fall with skill at low skill levels, rises in the majority of cases in the centre of the skill range, and falls at high skills. These results are consistent across all the specifications we test. We then extend the analysis to show that these results also hold for Cobb‐Douglas utility. Date: 2007 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:ijethy:v:3:y:2007:i:1:p:5-33 Ordering information: This journal article can be ordered from Access Statistics for this article International Journal of Economic Theory is currently edited by Kazuo Nishimura and Makoto Yano More articles in International Journal of Economic Theory from The International Society for Economic Theory |
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