Nonlinear Income Taxes and the Utility Possibility Set

This article analyzes constrained Pareto efficient nonlinear income tax schedules that are monotonic chains to the left. It is demonstrated that as long as all individuals have a positive consumption at the tax schedule that maximizes the utility of the worst-off individual, the constrained utility possibility set is convex. As a consequence, all constrained Pareto efficient nonlinear income tax schedules that are monotonic chains to the left can be identified by maximizing a weighted summation of net utilities.