Pareto Efficient Tax Structures

33 Pages Posted: 10 Jul 2007 Last revised: 28 Jun 2010

See all articles by Dagobert L. Brito

Dagobert L. Brito

Rice University - Department of Economics

Jonathan H. Hamilton

University of Florida - Warrington College of Business Administration - Department of Economics

Steven Slutsky

University of Florida - Department of Economics

Joseph E. Stiglitz

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: March 1990

Abstract

Most analyses of optimal income taxation make restrictive technical assumptions on preferences (such as single-crossing) and only derive properties of welfare-maximizing tax schedules. Here, for an economy with any finite numbers of groups and commodities, Pareto efficient tax structures are described assuming only continuity and monotonicity of preferences. Most results follow directly from a property of self-selection: at an optimum, one group will never envy the bundle of another group which pays a larger total tax. The bundle of a group paying the largest total tax is undistorted. Assuming normality, undistorted outcomes for a group form a connected segment on the constrained utility possibility frontier. The tax structure at distorted outcomes is also described.

Suggested Citation

Brito, Dagobert L. and Hamilton, Jonathan H. and Slutsky, Steven M. and Stiglitz, Joseph E., Pareto Efficient Tax Structures (March 1990). NBER Working Paper No. w3288. Available at SSRN: https://ssrn.com/abstract=468820

Dagobert L. Brito (Contact Author)

Rice University - Department of Economics ( email )

6100 South Main Street
Houston, TX 77005
United States

Jonathan H. Hamilton

University of Florida - Warrington College of Business Administration - Department of Economics ( email )

Gainesville, FL 32611-7140
United States
352-392-5017 (Phone)
352-392-7860 (Fax)

HOME PAGE: http://people.clas.ufl.edu/hamilton/

Steven M. Slutsky

University of Florida - Department of Economics

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States

Joseph E. Stiglitz

Columbia Business School - Finance and Economics ( email )

3022 Broadway
814 Uris Hall
New York, NY 10027
United States
(212) 854-0671 (Phone)
(212) 662-8474 (Fax)

HOME PAGE: http://www.josephstiglitz.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
55
Abstract Views
763
rank
374,677
PlumX Metrics