Article Summary – Article Example
Optimal Taxation in Theory and Practice (Summary) Danny et al (147) start by exploring how economists view the optimal tax theory based on different studies. The three economists try to find a solution by coming up with eight lessons that are aimed at evaluating the underpinnings of theory in reference to tax policy. They conclude that most social planners, most of times fail in their decision making, because of assumptions that people have similar preferences in social issues such as leisure. This means that the use of nonlinear function when trying to figure out on individual utilities is a big mess. If this approach is adopted, the trio suggest that the social planner will experience several challenges, when coming up with a tax system, and this is true according to my approach on tax issues.
The article has several theoretical approaches trying to explain the optimal tax policy in a dynamic environment. According to Danny et al (169), they argue that optimal taxes mainly rely on equitable distribution and this is the reason that the history of earnings plays a centre stage in the tax system. It is difficulty to even establish all results from the theories of optimal tax in the real policy because the policy makers use weird methods such as race to come up with the income tax system. The incorporation of the theory into the actual tax policy making is an open idea and all policy makers can explore and see how best the results would be if they adhered to the suggestions of the theory
Mankiw, N. Gregory, Weinzierl, Matthew and Yagan, Danny , Optimal Taxation in Theory and Practice, Journal of Economic Perspectives—Volume 23, Number 4—Fall 2009 Pages 147–174