On the optimality of optimal income taxation

Arbeitspapier

The Mirrleesian model of income taxation restricts attention to simple allocation mechanism with no strategic interdependence, i.e., the optimal labor supply of any one individual does not depend on the labor supply of others. It has been argued by Piketty (1993) that this restriction is substantial because more sophisticated mechanisms can reach first-best allocations that are out of reach with simple mechanisms. In this paper, we assess the validity of Piketty's critique in an independent private values model. As a main result, we show that the optimal sophisticated mechanism is a simple mechanism, or, equivalently, a Mirrleesian income tax system.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Preprints of the Max Planck Institute for Research on Collective Goods ; No. 2010,14

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Economics of Contract: Theory
• Subject: Optimal Income Taxation ; Mechanism Design ; Einkommensteuer ; Optimale Besteuerung ; Mechanism Design ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bierbrauer, Felix
• Event: Veröffentlichung
• (who): Max Planck Institute for Research on Collective Goods
• (where): Bonn
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/38880
• Last update: 10.03.2025, 11:45 AM CET