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http://hdl.handle.net/10419/47482
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| Title: | | Negative marginal tax rates and heterogeneity  |
| Authors: | | Choné, Philippe Laroque, Guy |
| Issue Date: | | 2009 |
| Series/Report no.: | | IFS working papers 09,12 |
| Abstract: | | Heterogeneity is likely to be an important determinant of the shape of optimal tax schemes. This article addresses the issue in a model à la Mirrlees with a continuum of agents. The agents differ in their productivities and opportunity costs of work, but their labor supplies depend only on a unidimensional combination of their two characteristics. Conditions are given under which the standard result that marginal tax rates are everywhere non-negative holds. This is in particular the case when work opportunity costs are distributed independently of productivities. But one can also get negative marginal tax rates: economies where negative tax rates are optimal at the bottom of the income distribution are studied, and a numerical illustration is given, based on UK data. |
| Subjects: | | optimal taxation heterogeneity welfare |
| JEL: | | H21 H31 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IFS Working Papers, Institute for Fiscal Studies (IFS)
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