scholarly journals Optimal Taxation and Optimal Tax Systems

10.3386/w3038 ◽  
1989 ◽  
Author(s):  
Joel Slemrod
Keyword(s):  
Optimal Taxation ◽  
Optimal Tax ◽  
Tax Systems

scholarly journals Optimal Taxation and Optimal Tax Systems

1990 ◽  
Vol 4 (1) ◽  
pp. 157-178 ◽  
Author(s):  
Joel Slemrod
Keyword(s):  
Tax Policy ◽  
Restricted Problem ◽  
Optimal Taxation ◽  
Critical Determinant ◽  
Tax System ◽  
Current State ◽  
Optimal Tax ◽  
Critical Issues ◽  
Resource Cost ◽  
Tax Systems

In its current state, optimal tax theory is incomplete as a guide to action for critical issues in tax policy. It is incomplete because it has not yet come to terms with taxation as a system of coercively collecting revenues from individuals who will tend to resist. The coercive nature of collecting taxes implies that the resource cost of implementing a tax system is large. Furthermore, alternative tax systems differ greatly in the resource cost of operation. Differences in the ease of administering various taxes have been and will continue to be a critical determinant of appropriate tax policy. I will first walk the reader through three of the principal propositions of optimal tax theory, pointing out along the way the key assumptions of the restricted problem under consideration. Next, I comment on the influence of the theory on recent tax policy developments. I conclude by sketching an alternative to optimal taxation, which I call the theory of optimal tax systems. This theory embraces the insights of optimal taxation but also takes seriously the technology of raising taxes and the constraints placed upon tax policy by that technology. A theory of optimal tax systems has the promise of addressing some of the fundamental issues of tax policy in a more satisfactory way than the theory of optimal taxation.

A Note On The Principle Of Equal Opportunities

2007 ◽  
pp. 128
Author(s):  
Fernando Cabrales ◽  
Ana Fernández ◽  
Fritz Grafe
Keyword(s):  
Empirical Analysis ◽  
Optimal Taxation ◽  
Oecd Countries ◽  
Developing Economy ◽  
Equal Opportunities ◽  
Tax Rate ◽  
Income Differentials ◽  
Optimal Tax ◽  
Equality Of Opportunities ◽  
The Individual

This note presents an empirical analysis of optimal taxation in Chile, adopting Roemer’s equality of opportunities as the evaluation criterion. The equality of opportunities optimal tax rules seek to equalize income differentials arising from factors beyond the control of the individual. Roemer’s theory of equality of opportunities (Roemer, 1998) has been employed to compute the extent to which tax-andtransfer regimes in some OECD countries equalize opportunities among citizens for income acquisition. In this note we apply this approach to Chile, a developing economy, and compare the results to those reported in Roemer, Aaberge, Colombino, Fritzell, Jenkins, Marx, Page, Pommer, Ruiz-Castillo, Segundo, Tranaes, Wagner and Zubiri (2003). We find that the optimal tax rate in Chile according to Roemer’s equalopportunities approach should be zero.

scholarly journals A SIMPLE MODEL OF OPTIMAL TAX SYSTEMS: TAXATION, MEASUREMENT AND UNCERTAINTY

2006 ◽  
Vol 74 (6) ◽  
pp. 645-669 ◽  
Author(s):  
SANJIT DHAMI ◽  
ALI AL-NOWAIHI
Keyword(s):  
Simple Model ◽  
Optimal Tax ◽  
Tax Systems

Optimal Redistributional Instruments in Law and Economics

2017 ◽  
Author(s):  
Chris William Sanchirico
Keyword(s):  
Optimal Taxation ◽  
Law And Economics ◽  
Policy Instruments ◽  
Unintended Consequences ◽  
Policy Framework ◽  
Policy Uncertainty ◽  
Conventional Model ◽  
Policy Model ◽  
Optimal Tax ◽  
Adequate Information

This article discusses three strands of the literature on optimal redistributional instruments. The first strand concerns what is sometimes referred to as the ‘tax substitution argument’, which supports the proposition that distributional goals should generally be pursued exclusively through taxes (and subsidies) on labour earnings. The argument rests the controversial assumption that, controlling for labour earnings, all individuals are identical. The second strand, a response to the first, attempts to counter the view that labour earnings exclusivity for redistributional policy is the natural lesson of the economic literature on ‘optimal taxation’. This second subliterature examines the consequences of removing the tax substitution assumption while retaining, arguendo, the optimal tax and policy framework. The third strand of the literature, concerning ‘policy uncertainty’, steps outside the bounds of the conventional model of optimal tax and policy. It first arises as a kind of alternative defence of labour earnings exclusivity in light of the challenge posed by policy eclecticism. Even if the conventional optimal tax and policy model sans tax substitution assumption points toward eclecticism, the defence proceeds, policymakers lack adequate information about the proper direction and scale of distributionally motivated adjustments to other policy instruments. Given the risk of perverse unintended consequences, policymakers should refrain from distributionally motivated tinkering.

Taxation of Couples under Assortative Mating

2014 ◽  
Vol 6 (3) ◽  
pp. 155-177 ◽  
Author(s):  
Alexander Frankel
Keyword(s):  
Assortative Mating ◽  
Optimal Taxation ◽  
Married Couples ◽  
Tax Rates ◽  
Optimal Tax ◽  
Marginal Tax Rates ◽  
Multidimensional Screening

I present a simple and tractable model of the optimal taxation of married couples, working off of the multidimensional screening framework of Armstrong and Rochet (1999). In particular, I study how the tax code varies with the degree of assortative mating. One result is that the “negative jointness” of marginal tax rates found in Kleven, Kreiner, and Saez (2007, 2009) for couples with uncorrelated earnings should be attenuated in the presence of assortative mating. When mating is sufficiently assortative, the optimal tax schedule is separable: an individual's taxes do not depend on his or her spouse's income. (JEL D82, H21, H24, J12)

scholarly journals Optimal Taxation with Private Insurance

2021 ◽  
Author(s):  
Yongsung Chang ◽  
Yena Park
Keyword(s):  
Incomplete Markets ◽  
Optimal Taxation ◽  
Private Insurance ◽  
Borrowing Constraints ◽  
Welfare Effects ◽  
Sufficient Statistics ◽  
Pecuniary Externalities ◽  
Optimal Tax ◽  
Private Market ◽  
Asset Distribution

Abstract We derive a fully nonlinear optimal income tax schedule in the presence of private insurance. We fill the gap in the literature by studying the optimal tax formula with a comprehensive structure of the private markets—including incomplete markets models— both theoretically and quantitatively. As in the standard taxation literature without private insurance (e.g., Saez (2001)), the optimal tax formula can still be expressed in terms of standard sufficient statistics. With private insurance, however, the formula involves additional terms that reflect how the private market interacts with public insurance. For example, the optimal tax formula should also consider asset distribution and pecuniary externalities as well as the welfare effects of borrowing constraints.

scholarly journals Fiscal Policy and Optimal Taxation in Sierra Leone: Testing for Tax Smoothing Hypothesis

2022 ◽  
Vol 14 (2) ◽  
pp. 61
Author(s):  
Samuel Bonzu
Keyword(s):  
Random Walk ◽  
Sierra Leone ◽  
Tax Policy ◽  
Optimal Taxation ◽  
Tax Rate ◽  
Optimal Tax Policy ◽  
Optimal Tax ◽  
Review Period ◽  
Tax Smoothing ◽  
The Government

This paper empirically investigate whether the budget imbalances in Sierra Leone over the review period is consistent with optimal tax policy. The procedure involves testing if tax smoothing hypothesis hold for Sierra Leone. In this regard, three different empirical approaches were performed. Firstly, I examine the random walk property of the tax rate. The null hypothesis of non-stationarity of tax rate could not be rejected, which implies the tax rate follows random walk. Second, I examined whether changes in tax rate is predictable by regressing changes in tax rate by its own lagged values. The result shows that tax rate is unpredictable, as changes in tax cannot be determined by its lagged values. Finally, a VAR model was employed to examine whether tax rate can be predicted by its own lagged values together with changes in the government spending rate and the growth rate of real GDP. The results indicate that all the variables employed were found not be significant is predicating the tax rate. Overall, all the empirical estimations support the existence of tax smoothing over the sample period and that the budget inbalances over the review period is consistent with optimal tax policy.

Feedback Nash equilibria in optimal taxation problems

2009 ◽  
Vol 7 (4) ◽  
Author(s):  
Mikhail Krastanov ◽  
Rossen Rozenov
Keyword(s):  
Continuous Time ◽  
Optimal Taxation ◽  
Public Economics ◽  
Nash Equilibria ◽  
Stackelberg Game ◽  
Necessary Optimality Conditions ◽  
Capital Income ◽  
Optimal Tax ◽  
Feedback Nash Equilibria ◽  
Long Run

AbstractA well-known result in public economics is that capital income should not be taxed in the long run. This result has been derived using necessary optimality conditions for an appropriate dynamic Stackelberg game. In this paper we consider three models of dynamic taxation in continuous time and suggest a method for calculating their feedback Nash equilibria based on a sufficient condition for optimality. We show that the optimal tax on capital income is generally different from zero.

scholarly journals Optimal Taxation with Cournot Oligopoly

2005 ◽  
Vol 5 (1) ◽  
Author(s):  
Leslie J. Reinhorn
Keyword(s):  
Price Elasticity ◽  
Equilibrium Model ◽  
Imperfect Competition ◽  
Optimal Taxation ◽  
Cournot Oligopoly ◽  
Tax Rate ◽  
Elasticity Of Demand ◽  
Price Elasticity Of Demand ◽  
Optimal Tax ◽  
Optimal Linear

AbstractThis paper studies optimal linear taxation in a general equilibrium model with Cournot oligopoly. The main result is the following. With imperfect competition the tendency toward "inverse elasticities" tax rules will be weakened and may even be reversed. That is, an upward sloping relationship may exist between an industry's optimal tax rate and its own-price elasticity of demand, unlike the perfectly competitive case.

scholarly journals Optimal Taxation with Behavioral Agents

2020 ◽  
Vol 110 (1) ◽  
pp. 298-336 ◽  
Author(s):  
Emmanuel Farhi ◽  
Xavier Gabaix
Keyword(s):  
Optimal Taxation ◽  
General Framework ◽  
Income Taxation ◽  
Commodity Taxation ◽  
Optimal Tax ◽  
Wide Range ◽  
Optimal Taxes ◽  
Nonlinear Income Taxation

This paper develops a theory of optimal taxation with behavioral agents. We use a general framework that encompasses a wide range of biases such as misperceptions and internalities. We revisit the three pillars of optimal taxation: Ramsey (linear commodity taxation to raise revenues and redistribute), Pigou (linear commodity taxation to correct externalities), and Mirrlees (nonlinear income taxation). We show how the canonical optimal tax formulas are modified and lead to novel economic insights. We also show how to incorporate nudges in the optimal taxation framework, and jointly characterize optimal taxes and nudges. (JEL D62, D91, H21)

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