1. A new government voted into office is deciding on setting a new tax rate for the top income tax bracket (more than $1,000,000 annual income). First they commissioned a study which ran experiments to determine how earnings respond to taxes and subsidies. They found that for the top bracket, when the net-of-tax rate (1-t) is increased by 10%, the pre-tax income of the top income group rises by 1%.

1. What is the "optimal tax" rate for the top bracket following the Diamond-Saez approach?

1. What additional (normative or positive) considerations may matter when deciding on the top marginal tax rate?