PUBLIC-GOODS, SELF-SELECTION AND OPTIMAL INCOME TAXATION

Using the self-selection approach to tax analysis, this paper derives a modified Samuelson Rule for the provision of public goods when the government deploys an optimal nonlinear income tax. This approach gives a straightforward interpretation of the central result in this area, generalises it, and provides a simple characterisation of optimal policy in a wide range of circumstances. The analysis also emphasises and clarifies the significance of the choice of numeraire for the optimality of ''decentralising'' public spending decisions.