This article tackles the issue of choosing the optimal income tax schedule. The author discusses tax schedules’ approach based on two mathematical models. The first model is a game-theory model which helps to construct the average tax rates schedule. The second model is an optimization model used to construct the marginal tax rates schedule. Defining the input parameters is the most challenging step in the application of these models.
The restrictions on the choice of input parameters for the first (main) model are defined. Special attention is devoted to the choice of the elasticity parameters in this model.
The obtained results allow to reduce the issue of defining the marginal income tax rates to the definition of the input parameters in the main model. The same remark is valid for the issue of defining the level of tax schedule. Moreover, the quantity of the pointed-out parameters for this model problem turns out to be less than in the case of the direct choice of the marginal tax rates schedule.