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Higher Tax for Top Earners

Felix FitzRoy and Jim Jin ()
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Jim Jin: University of St Andrews

Journal of Economics, 2017, vol. 122, issue 2, 121-136

Abstract: Abstract The literature can justify both increasing and decreasing marginal taxes (IMT & DMT) on top incomes under different welfare objectives and income distributions. Even when DMT are theoretically optimal, they are often politically infeasible. Then a flat tax seems to be a constrained optimal solution. We show however that, given any flat tax we can increase the total utility of a poor majority by raising the top income tax rate under a simple condition, which can be checked with empirical data. We further generalize our main results allowing different welfare weights, declining elasticity of labor supply and more tax bands.

Keywords: Flat tax; Piecewise linear taxes; Income redistribution (search for similar items in EconPapers)
JEL-codes: D30 D60 H20 (search for similar items in EconPapers)
Date: 2017
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