Heterogeneity in Needs and Negative Marginal Tax Rates
32 Pages Posted: 1 Dec 2017
Date Written: October 26, 2017
This paper highlights the possibility that negative marginal tax rates arise in an intensive-margin optimal income tax model where wages are exogenous and preferences are homogeneous, but where agents differ both in skills (labor market productivity) and their needs for a work-related consumption good.
Keywords: nonlinear income taxation, negative marginal tax rates, heterogeneity in needs, redistribution
JEL Classification: H210
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