This book provides a comprehensive survey of optimal income tax theory, following the development of research strategy from the basic Mirrlees model through its refinements that examine how optimal tax rates and the shape of tax schedules are affected by new considerations. The author covers not only the historical background and modern formulations of the theory, but also extends his discussion to the most important extensions of the model and the interrelation of income tax with other instruments of tax and expenditure policy.

Tax systems raise large amounts of revenue for funding public sector's activities, and tax/transfer policy, together with public provision of education, health care, and social services, play a crucial role in treating the symptoms and the causes of poverty. The normative analysis is crucial for tax/transfer design because it makes it possible to assess separately how changes in the redistributive criterion of the government, and changes in the size of the behavioural responses to taxes and transfers, affect the optimal tax/transfer system. Optimal tax theory provides a way of thinking...