Flat taxes are neutral under log utility
July 27, 2019
(Cross-posted from facebook.) If welfare grows with log income, then a flat 50% tax actually has no impact on my incentive to work—I get half as many dollars per hour worked, but I’m twice as poor so I value each dollar twice as much. (That is to say, the income effect exactly offsets the substitution … More Flat taxes are neutral under log utility