On efficient taxation
On efficient taxation

Summary/Abstract: We solve an often neglected problem of efficient taxation where the policy maker is interested in minimizing the dead weight burden imposed on the society by labor income taxes. Specifically, we argue that the efficient tax function assumes the form of a step function. Furthermore, we allow the policy maker to exhibit aversion toward inequality and show that the key result holds, i.e., that the tax function that ensures efficiency is locally flat.

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