scholarly journals The Desirability of Commodity Taxation under Non-Linear Income Taxation and Heterogeneous Tastes

10.3386/w8029 ◽  
2000 ◽  
Author(s):  
Emmanuel Saez
Keyword(s):  
Income Taxation ◽  
Commodity Taxation ◽  
Non Linear

scholarly journals Optimal Policy with Heterogeneous Preferences

2008 ◽  
Vol 8 (1) ◽  
Author(s):  
Louis Kaplow
Keyword(s):  
Social Welfare ◽  
Public Goods ◽  
Optimal Policy ◽  
Income Tax ◽  
Social Welfare Function ◽  
Income Taxation ◽  
Heterogeneous Preferences ◽  
Commodity Taxation ◽  
Policy Rules ◽  
The Social

Abstract Optimal policy rules—including those regarding income taxation, commodity taxation, public goods, and externalities—are typically derived in models with homogeneous preferences. This article reconsiders many central results for the case in which preferences for commodities, public goods, and externalities are heterogeneous. When preference differences are observable, standard second-best results in basic settings are unaffected, except those for the optimal income tax. Optimal levels of income taxation may be higher, the same, or lower on types who derive more utility from various goods, depending on the nature of preference differences and the concavity of the social welfare function. When preference differences are unobservable, all policy rules may change. The determinants of even the direction of optimal rule adjustments are many and subtle.

Optimal Origin-based Commodity Taxation in a Small Open Economy

2007 ◽  
Vol 7 (1) ◽  
Author(s):  
Giampaolo Arachi
Keyword(s):  
Social Welfare ◽  
Open Economy ◽  
Small Open Economy ◽  
Tax Rates ◽  
Commodity Taxation ◽  
Labour Income ◽  
The Social ◽  
Non Linear ◽  
Value Judgements ◽  
The Government

Abstract This paper investigates whether the pursuit of redistributional objectives may provide a rationale for origin-based taxation in small open economies. The analysis is developed in a simple two-class economy where consumers are classified according to the type of labour they supply. As world prices are given for a small open economy, the full burden of origin-based commodity taxes falls on the two types of labour. When a non-linear tax is levied on labour income, origin-based taxes cannot directly improve income distribution as the two types of labour face different marginal tax rates. However, the government can exploit the differential incidence of these origin-based taxes and increase social welfare by relaxing the self-selection constraints that bind the non-linear tax. Rather surprisingly, the value judgements embedded in the social welfare functional do not affect the structure of optimal origin-based commodity taxation.The paper also shows that the optimal structure of origin-based commodity taxation does not change when the labour income tax schedule is constrained to be linear, and that a positive source-based tax on capital income may be optimal if it results in a differential burden on the two types of labour.

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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