to marginal tax changes. In our economy, agents who are sufficiently productive can obtain higher returns by choosing to … be entrepreneurs. Return heterogeneity amplifies the responsiveness of total income to marginal tax changes along the … incentives to invest for the richest, high-return entrepreneurs, thus amplifying their income responses to marginal tax changes …

In addition to funding government and redistributing income, a redistributive tax-and-transfer system, and a … progressive income tax in particular, provides insurance against the risk of uncertain future income. By providing for high taxes … for high incomes, and low taxes, exemptions, and transfers for low incomes, a progressive income tax lowers the volatility …