Appendix
Tax Reform and Tax Theory
Tax reform is a topic of unending political debate in all the industrialized market economies, the perennial questions being what is the best tax base and how progressive should the chosen tax be? The Appendix discusses what mainstream tax theory has to offer in answering these two questions, drawing on results from previous chapters and adding some considerations that are not covered elsewhere in the text.
As it happens, most economists are fairly guarded about offering advice on tax reform. The reason is that tax theory does not provide specific answers to either question. The only consensus that has emerged among economists is how to think about these questions.
The modern view follows Mirrlees approach to optimal ...
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