Fair income tax

Marc Fleurbaey, François Maniquet

Research output: Contribution to journalArticle

74 Scopus citations

Abstract

In a model where agents have unequal skills and heterogeneous preferences over consumption and leisure, we look for the optimal tax on the basis of efficiency and fairness principles and under incentive-compatibility constraints. The fairness principles considered here are: (1) a weak version of the Pigou-Dalton transfer principle; (2) a condition precluding redistribution when all agents have the same skills. With such principles we construct and justify specific social preferences and derive a simple criterion for the evaluation of income tax schedules. Namely, the lower the greatest average tax rate over the range of low incomes, the better. We show that, as a consequence, the optimal tax should give the greatest subsidies to the working poor (the agents having the lowest skill and choosing the largest labour time).

Original languageEnglish (US)
Pages (from-to)55-83
Number of pages29
JournalReview of Economic Studies
Volume73
Issue number1
DOIs
StatePublished - Jan 1 2006
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Fair income tax'. Together they form a unique fingerprint.

  • Cite this