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While it's difficult to pinpoint specific countries that have successfully implemented the optimal tax rate based on Diminishing Marginal Utility, it's worth noting that many developed countries, including those in Scandinavia like Sweden and Denmark, have progressive tax systems. These systems, which tax higher income at higher rates, are in line with the concept of Diminishing Marginal Utility. However, whether these rates are 'optimal' is a matter of ongoing debate among economists.
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Experts like Nobel Prize in Economic Sciences Laureate Peter Diamond, in collaboration with Emmanuel Saez, have estimated the optimal tax rate to be 73%. These rates are based on Diminishing Marginal Utility, the idea that a dollar is worth less to those with very high incomes compared to those with far lower incomes. Therefore, a policy that makes the rich a bit poorer will impact very few people and will barely affect their life satisfaction. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue while still preserving the incentive to generate wealth.
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