MIRRLEESIAN OPTIMAL TAXATION: REVIEW OF THE STATIC AND DYNAMIC FRAMEWORK
MIRRLEESIAN OPTIMAL TAXATION: REVIEW OF THE STATIC AND DYNAMIC FRAMEWORK

Summary/Abstract: Modern tax theory has been subject of investigation of thispaper. Namely static taxation theory with issues such as: income effects, inverseelasticity rule, and linear and non-linear taxa formulas. The issue of heterogeneity is present in the dynamic taxation models and inverse Euler equation where savings affects incentive to work, so government needs to discourage savings to prevent the flowing deviation by highly skilled to save more today and work less tomorrow. Other important implication for fiscal policy is that if your labour income is below average, your capital tax is positive. Numerical results at the end have confirmed results from theoretical models in optimal taxation outlined in this paper.

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