According to the Principle of Equal Marginal Sacrifice proposed by Hugh Dalton, an optimal income tax structure is one where:

Solution: The Principle of Equal Marginal Sacrifice is an equity principle used to design optimal tax systems. · It is based on the idea of minimizing the total sacrifice (utility loss) suffered by society from raising a given amount of tax revenue. · It concludes that the tax system should be structured so that the marginal utility of income lost due to taxation is equal across all taxpayers. · Assuming the marginal utility of income is diminishing, this principle necessarily leads to a progressive income tax system, where higher-income individuals pay a greater proportion of their income in taxes.