This study examines the shape of an optimal income tax schedule in a monetary economy. In equilibrium, money’s role is to allocate resources across generations, while a tax-transfer scheme serves as a form of social insurance. It is found that the optimal real income tax with money can be progressive.
Published in: _Journal of Economic Dynamics and Control_ (Vol. 17, No. 3, May 1993, pp. 443-465), https://doi.org/10.1016/0165-1889(93)90006-E.