Pareto Efficient Income Taxation

I study the set of Pareto efficient tax schedules in Mirrlees ’ optimal tax model and provide a simple test for the efficiency of a given tax schedule. The efficiency condition generalizes the the well-known zero-tax-at-the-top result: taxes should be low in regions where the density of income falls rapidly. Both the set of efficient and inefficient tax schedules is large. I use the framework to explore the optimality of a flat tax, to bound the top tax rate of a nonlinear schedule, and to evaluate the efficiency of a tax system that does not condition on observable traits. This draft is preliminary. Brandon Lehr provided invaluable research assistance. I thank Dan Feenberg for pro-viding an extract of the SOI panel data. I appreciate comments and discussions with Manuel Amador, George-Marios