Optimal Redistributive Taxation

ISBN : 9780198753414

Matti Tuomala
560 Pages
189 x 246 mm
Pub date
Jan 2016
Send mail

Tax systems raise large amounts of revenue for funding public sector's activities, and tax/transfer policy, together with public provision of education, health care, and social services, play a crucial role in treating the symptoms and the causes of poverty. The normative analysis is crucial for tax/transfer design because it makes it possible to assess separately how changes in the redistributive criterion of the government, and changes in the size of the behavioural responses to taxes and transfers, affect the optimal tax/transfer system. Optimal tax theory provides a way of thinking rigorously about these trade-offs. Written primarily for graduate students and researchers, this volume is intended as a textbook and research monograph, connecting optimal tax theory to tax policy. It comments on some policy recommendations of the Mirrlees Review, and builds on the authors work on public economics, optimal tax theory, behavioural public economics, and income inequality. The book explains in depth the Mirrlees model and presents various extensions of it. The first set of extensions considers changing the preferences for consumption and work: behavioural-economic modifications (such as positional externalities, prospect theory, paternalism, myopic behaviour and habit formation) but also heterogeneous work preferences (besides differences in earnings ability). The second set of modifications concerns the objective of the government. The book explains the differences in optimal redistributive tax systems when governments - instead of maximising social welfare - minimise poverty or maximise social welfare based on rank order or charitable conservatism social welfare functions. The third set of extensions considers extending the Mirrlees income tax framework to allow for differential commodity taxes, capital income taxation, public goods provision, public provision of private goods, and taxation commodities that generate externalities. The fourth set of extensions considers incorporating a number of important real-word extensions such as tagging of tax schedules to certain groups of tax payers. In all extensions, the book illustrates the main mechanisms using advanced numerical simulations.


1. Introduction

2. Optimal Labour Income Taxation: Background

3. Optimal Linear Income Taxation

4. The Optimal Nonlinear Income Tax Problem

5. The Shape of Optimal Income Tax Schedule: Numerical Simulations with Income Effects

6. Optimal Income Tax/Transfer Program in the Extensive Margin Model

7. Relativity and Optimal Labour Income Taxation

8. Optimal Income Taxation and Tagging

9. Optimal Income Taxes/Transfers and Non-Welfarist Social Objectives

10. Heterogeneous Work Preferences and Optimal Redistribution

11. Income Uncertainty and Optimal Income Taxation

12. Optimal Mixed Taxation

13. Public Provision and Optimal Taxation

14. Optimal Capital Income Taxation

15. Discussion and Conclusions

About the author: 

Matti Tuomala is Professor at University of Tampere, Finland. Being a student of Nobel-prize winner James Mirrlees, Matti Tuomala has devoted large parts of his academic career to extending the Mirrlees (1971) framework of optimal non-linear income taxation. He published a book on this topic in 1990 entitled Optimal Income Tax and Redistribution (OUP). This new book provides a thorough and detailed summary of the academic work that he and many others have conducted over the last 25 years.

The price listed on this page is the recommended retail price for Japan. When a discount is applied, the discounted price is indicated as “Discount price”. Prices are subject to change without notice.