Optimal income tax

Optimal income tax theory seeks the most efficient way for governments to design tax systems that balance fairness and economic growth. It aims to set tax rates that motivate people to work and invest while ensuring enough revenue for public services. The approach considers how taxes influence behavior, such as work effort and savings, and strives to minimize economic distortions. Essentially, it finds the best trade-off between collecting enough tax revenue and maintaining incentives for productivity, leading to a fair and efficient distribution of resources in society.