Revenue-maximizing top tax rates revisited: mobile response and the elasticity of the Pareto parameter

The Pareto parameter is a measure of the thickness of the income distribution at the top. We show that the elasticity of the Pareto parameter with respect to the top tax rate alone provides a sufficient statistic for the characterization of revenue-maximizing top tax rates. The derivation of this result builds on our proposed mobile response, which extends Saez's (2001) behavioral response by incorporating the extensive mobility of the top income group into and out of the top tax bracket.