The Choice of Income Tax Progression Available to Purchase

This article examines income tax progression as a mechanism for achieving the intertemporal adjustments of earnings profiles. With a rising income profile, the preference for progression arises from the market (borrowing) rate of interest exceeding the rate at which the government borrows. For a given tax burden, each individual is found to prefer a marginal tax rate of unity, with the threshold set as high as possible. With a common tax structure, the conditions under which all individuals prefer progression is examined.