OPTYMALNA PROGRESJA PODATKOWA

Abstract

In this paper we try to find the optimal income tax system. The government must collect a certain amount of tax. The society consists of people with different wealth. The problem is to find an appropriate tax rate for every level of wealth so that the total social utility (measured as the sum of the personal utilities) is maximised. We consider two different tax models - a static one and a dynamic one. It turns out that the best tax system is progressive. However, if we consider its dynamics, we find that such a system should offer large tax reliefs for investments.