| Abstract: | Summary. This paper discusses the existence of an optimal income tax and distinguishes itself from the previous articles in two respects. In previous papers, the self selection condition was not necessarily consistent with the individual budget constraint. Furthermore, implementability in previous papers was implicit in individual ability, rather than individual income, as the basis of the tax function. We offer a different concept of the self selection conditions: Anti Normal Envy that is consistent with the individual budget constraint and that we show to be equivalent to the competitive equilibrium under a tax function based on income. We then establish the existence of an implementable optimal income tax.Received: 9 December 2000, Revised: 5 August 2003, JEL Classification Numbers: H21, C62, D59.Correspondence to: Jun IritaniThe authors are grateful to an anonymous referee of this journal whose suggestions were instrumental to our revision of the paper, and to Professors Takao Kataoka, Tomoyuki Kamo, Tetsuya Kishimoto, and Mototsugu Fukushige, and the members of the Kobe-Osaka Joint Seminar in Mathematical Economics, for their invaluable comments. |
