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International Tax and Public Finance

, Volume 14, Issue 3, pp 225–261 | Cite as

Optimal nonlinear taxes for families

  • Craig Brett
Article

Abstract

The problem faced by a taxation authority choosing a tax schedule for families is modeled as a multi-dimensional screening problem. A description of the possible constrained Pareto-efficient mechanisms is given. The implications of a standard redistributive assumption on the sign of marginal tax rates is explored. In contrast to unidimensional taxation models, the redistributive assumption does not imply that marginal tax rates are everywhere non-negative. The qualitative features of optimal tax schedules are discussed. It is concluded that taxation based solely on total family income is rarely optimal.

Keywords

Asymmetric information Household decision making Multi-dimensional screening Optimal income taxation 

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Copyright information

© Springer Science + Business Media, LCC 2006

Authors and Affiliations

  1. 1.Department of EconomicsMount Allison UniversitySackvilleCanada

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