nach oben

Social Choice and Welfare

Erschienen in:

10.07.2021 | Original Paper

Optimal tax problems with multidimensional heterogeneity: a mechanism design approach

verfasst von: Laurence Jacquet, Etienne Lehmann

Erschienen in: Social Choice and Welfare | Ausgabe 1-2/2023

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

We propose a new method, that we call an allocation perturbation, to derive the optimal nonlinear income tax schedules with multidimensional individual characteristics on which taxes cannot be conditioned. It is well established that, when individuals differ in terms of preferences on top of their skills, optimal marginal tax rates can be negative. In contrast, we show that with heterogeneous behavioral responses and skills, one has optimal positive marginal tax rates, under utilitarian preferences and maximin.

Vorheriger Artikel Roberts’ weak welfarism theorem: a minor correction

Nächster Artikel Taxation behind the veil of ignorance

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Nur mit Berechtigung zugänglich

John Weymark has largely contributed to the literature on optimal income taxation, see e.g. Weymark (1986), Weymark (1987) and Brett and Weymark (2011).

Our paper studies the optimal tax system when individual characteristics, despite being observable by the tax authority, cannot be used as tags (Akerlof 1978), due to legal and/or horizontal equity reasons.

Our definition of “group” is identical to the one in Werning (2007), p. 13.

A smoothly increasing (decreasing) function is also called an increasing (decreasing) diffeomorphism for which the derivative maps the positive real line onto itself.

In (Jacquet and Lehmann 2021, Proposition 5), we show that the assumption of a smoothly-increasing-in-types allocation amounts to assuming: (i) twice differentiability of the tax function \(T(\cdot )\), that (ii) for all \((w,\theta )\in \mathbb {R}_+^*\times \Theta\), the second-order condition associated to the individual maximization program holds strictly and that (iii) for all \((w,\theta )\in \mathbb {R}_+^*\times \Theta\), the function \(y\mapsto \mathscr {U}\left( y-T(y),y;w,\theta \right)\) admits a unique global maximum over \(\mathbb {R}_+\).

For instance, we never found cases where the second-order incentive-compatibility constraints were violated in the large set of simulations we run on US data with taxpayers differing in terms of gender and labor supply elasticities, see Jacquet and Lehmann (2021).

More precisely, in the left-hand side of Eq. (14a), the term \(-\frac{v_{y}\left[ w,\theta \right] }{w\cdot v_{yw}\left[ w,\theta \right] }\) which is equal to the ratio of \(\varepsilon (w,\theta )\) and \(\alpha (w,\theta )\) [see Eq. (35) in the Appendix], is weighted by the conditional density times the skill, \(W(w,\theta )\ f(W(y,\theta )|\theta )\). And, in the right-hand side of (14a), which encapsulates the mechanical and income effects, the weights are the conditional skill densities.

In Hellwig (2007), under a utilitarian criterion, positive optimal tax rates are obtained with more general preferences.

If the utility function \(u(\cdot )\) in (1) were parameterized by type w and \(\theta\) while \(v(\cdot )\) were simply parameterized by w, individuals who earn the same income would have distinct social marginal welfare weights. This could drive negative marginal tax rates. Similarly, if both \(u(\cdot )\) and \(v(\cdot )\) were parameterized by w and \(\theta\), one would also expect negative marginal tax rates. Let us stress that our method could not be used in this framework since the pooling function (10) cannot depend simultaneously on Y and C.

Hence function \({\underline{W}}(\cdot ,\theta )\) coincides with the pooling function \(W(\cdot ,\theta )\).

Indeed, at \(m=0\), \(\mathscr {Y}^R_y\) does no longer depend on the direction R of the tax reform.

Akerlof GA (1978) The economics of tagging as applied to the optimal income tax, welfare programs, and manpower planning. Am Econ Rev 68(1):8–19

Blumkin T, Sadka E, Shem-Tov Y (2015) International tax competition: zero tax rate at the top re-established. Int Tax Public Finance 22(5):760–776CrossRef

Boadway R, Marchand M, Pestieau P, del Mar Racionero M (2002) Optimal redistribution with heterogeneous preferences for leisure. J Public Econ Theory 4(4):475–498CrossRef

Brett C, Weymark JA (2003) Financing education using optimal redistributive taxation. J Public Econ 87(11):2549–2569CrossRef

Brett C, Weymark JA (2011) How optimal nonlinear income taxes change when the distribution of the population changes. J Public Econ 95(11):1239–1247CrossRef

Choné P, Laroque G (2010) Negative marginal tax rates and heterogeneity. Am Econ Rev 100(5):2532–47CrossRef

Cremer H, Lozachmeur J-M, Pestieau P (2012) Income taxation of couples and the tax unit choice. J Popul Econ 25(2):763–778CrossRef

Cuff K (2000) Optimality of workfare with heterogeneous preferences. Can J Econ 33(1):149–174CrossRef

Diamond P (1998) Optimal income taxation: an example with U-shaped pattern of optimal marginal tax rates. Am Econ Rev 88(1):83–95

Gomes R, Lozachmeur J-M, Pavan A (2018) Differential taxation and occupational choice. Rev Econ Stud 85(1):511–557CrossRef

Guesnerie R (1995) A contribution to the pure theory of taxation. Cambridge University Press, CambridgeCrossRef

Hammond P (1979) Straightforward individual incentive compatibility in large economies. Rev Econ Stud 46(2):263–282CrossRef

Hellwig MF (2007) A contribution to the theory of optimal utilitarian income taxation. J Public Econ 91(7):1449–1477CrossRef

Hendren N (2020) Measuring economic efficiency using inverse-optimum weights. J Public Econ 2020:187

Jacquet L, Lehmann E (2013) Optimal redistributive taxation with both extensive and intensive responses. J Econ Theory 148(5):1770–1805CrossRef

Jacquet L, Lehmann E (2021) Optimal income taxation with composition effects. J Eur Econ Assoc 19(2):1299–1341

Kleven HJ, Kreiner CT, Saez E (2009) The optimal income taxation of couples. Econometrica 77(2):537–560CrossRef

Lehmann E, Simula L, Trannoy A (2014) Tax me if you can! Otimal nonlinear income tax between competing governments. Q J Econ 129(4):1995–2030CrossRef

Lockwood BB, Weinzierl M (2015) De Gustibus non est Taxandum: heterogeneity in preferences and optimal redistribution. J Public Econ 124:74–80CrossRef

Mirrlees J (1971) An exploration in the theory of optimum income taxation. Rev Econ Stud 38(2):175–208CrossRef

Piketty T (1997) La Redistribution fiscale contre le chômage. Revue française d’économie 12(1):157–203CrossRef

Ramsey FP (1927) A contribution to the theory of taxation. Econ J 37(145):47–61CrossRef

Rochet J (1985) The taxation principle and multi-time Hamilton-Jacobi equations. J Math Econ 14(2):113–128CrossRef

Rochet J-C, Stole LA (2002) Nonlinear pricing with random participation. Rev Econ Stud 69(1):277–311CrossRef

Rochet J-C, Stole LA (1998) Ironing, sweeping, and multidimensional screening. Econometrica 66(4):783–826CrossRef

Rothschild C, Scheuer F (2013) Redistributive taxation in the Roy model. Q J Econ 128(2):623–668CrossRef

Rothschild C, Scheuer F (2016) Optimal taxation with rent-seeking. Rev Econ Stud 83(3):1225–1262CrossRef

Sachs D, Tsyvinski A, Werquin N (2020) Nonlinear tax incidence and optimal taxation in general equilibrium. Econometrica 88(2):469–493CrossRef

Saez E (2001) Using elasticities to derive optimal income tax rates. Rev Econ Stud 68(1):205–229CrossRef

Saez E (2002) Optimal income transfer programs: intensive versus extensive labor supply responses. Q J Econ 117:1039–1073CrossRef

Salanié B (2011) The economics of taxation, 2nd edn. MIT Press

Scheuer F (2013) Adverse selection in credit markets and regressive profit taxation. J Econ Theory 148(4):1333–1360CrossRef

Scheuer F (2014) Entrepreneurial taxation with endogenous entry. Am Econ J Econ Policy 6(2):126–63CrossRef

Scheuer F, Werning I (2016) Mirrlees meets Diamond-Mirrlees. Working Paper 22076, National Bureau of Economic Research, March

Werning I (2007) Pareto efficient income taxation. MIT Working Paper 2007

Weymark JA (1986) A reduced-form optimal nonlinear income tax problem. J Public Econ 30(2):199–217CrossRef

Weymark JA (1987) Comparative static properties of optimal nonlinear income taxes. Econometrica 55(5):1165–1185CrossRef

Wilson RB (1993) Nonlinear pricing. Oxford University Press, Oxford

Titel: Optimal tax problems with multidimensional heterogeneity: a mechanism design approach
verfasst von: Laurence Jacquet
Etienne Lehmann
Publikationsdatum: 10.07.2021
Verlag: Springer Berlin Heidelberg
Erschienen in: Social Choice and Welfare / Ausgabe 1-2/2023
Print ISSN: 0176-1714
Elektronische ISSN: 1432-217X
DOI: https://doi.org/10.1007/s00355-021-01349-4

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 1-2/2023

Roberts’ weak welfarism theorem: a minor correction

Strategy-proof mechanism design with non-quasi-linear preferences: ex-post revenue maximization for an arbitrary number of objects

Bunching in rank-dependent optimal income tax schedules

A modification aimed at reducing the manipulability and inefficiency of the Boston school choice mechanism

The possibility of generalized social choice functions and Nash’s independence of irrelevant alternatives

Tailored recommendations