| Abstract: |
This paper inverts the usual logic of applied optimal income taxation. It
starts from the observed distribution of income before and after
redistribution and corresponding marginal tax rates. Under a set of
simplifying assumptions, it is then possible to recover the social welfare
function that would make the observed marginal tax rate schedule optimal. In
this framework, the issue of the optimality of an existing tax-benefit system
is transformed into the issue of the shape of the social welfare function
associated with that system and whether it satisfies elementary properties.
This method is applied to the French redistribution system with the
interesting implication that the French redistribution authority either has a
rather low estimate of the labor supply elasticity or does not give positive
social weights to the richest tax payers. |