Optimal labor income taxation under maximin: an upper bound

Abstract

This paper assumes the standard optimal income tax model of Mirrlees (Review of Economic Studies, 1971). It gives fairly mild conditions under which the optimal nonlinear labor income tax profile derived under maximin has higher marginal tax rates than the ones derived with welfarist criteria that sum over the population any concave transformation of individual utilities. This strict dominance result is always valid close to the bounds of the skill distribution and almost everywhere (except at the upper bound) when quasilinear-in-consumption preferences are assumed.