The undesirability of randomized income taxation under decreasing risk aversion

For the standard specification of the utilitarian optimal income tax problem with hidden characteristics, the paper shows that randomized tax schemes are undesirable if preferences exhibit a property of weakly decreasing risk aversion according to the multidimensional risk aversion concept of Hellwig [Hellwig, M.F., 2004, Risk Aversion in the Small and the Large with Multidimensional Outcomes. Max Planck Institute for Research on Collective Goods, Bonn. Preprint 2004/6, http://www.mpp-rdg.mpg.de/pdf_dat/2005_23online.pdf]. This property of decreasing risk aversion also implies that the optimal income tax schedule is unique and depends continuously on the data of the problem.