Taxing Uncertain Incomes
This chapter discusses the issue of guessing whether the uncertainty of labour income results should be a reason for higher or lower marginal tax rates. In 1980, Varian was able to examine the question of optimal taxation when consumers are uncertain about income. This current discussion on the subject includes approximations to the optimal linear tax schedule, with an emphasis that the linear income tax is not an optimal policy within the simple model of labour supply.
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