Optimal taxation theory

Optimal taxation theory seeks to design tax systems that balance generating sufficient revenue with minimizing economic distortions and inequality. It aims to collect taxes efficiently so that individuals and businesses face minimal disincentives to work, save, or invest. The theory considers factors like fairness, administrative ease, and economic impact, often suggesting that taxes should be structured to taxation different income levels appropriately. Ultimately, it strives for a tax policy that achieves public finance goals while supporting economic growth and social equity.