Change search
ReferencesLink to record
Permanent link

Direct link
Optimal Inequality behind the Veil of How Should Commodities Be Taxed?: A Counterargument to the Recommendation in the Mirrlees Review
Uppsala University.
Uppsala University.
University of Tampere, Finland.
2013 (English)Report (Other academic)TextAlternative title
How Should Commodities Be Taxed? : A Counterargument to the Recommendation in the Mirrlees Review (English)
Abstract [en]

The Mirrlees Review recommends that commodity taxation should in general be uniform, but with some goods consumed in conjunction with labour supply (such as child care) left untaxed. This paper examines the validity of this claim in an optimal income tax framework. Contrary to the recommendation of the Review, our theoretical results imply that even if all goods other than the good needed for working are separable from leisure, the optimal tax on these goods should not be uniform. Instead, goods with larger expenditure elasticities should be discouraged relatively more by the tax system. If the government fully subsidises the cost of the good needed for working, then commodity taxation is uniform under the standard separability assumption. Our results imply that the optimal commodity tax system is dependent on the expenditure side of the government. A calibration exercise presented in the paper suggests that these results can be quantitatively important.

Place, publisher, year, edition, pages
Uppsala: Uppsala universitet, 2013. , 26 p.
Working paper / Uppsala Center for Fiscal Studies, Uppsala University, 2013:5
Keyword [en]
income taxation, commodity taxation, public provision, separability
National Category
Research subject
URN: urn:nbn:se:lnu:diva-51256OAI: diva2:913793

Working paper

Available from: 2016-03-22 Created: 2016-03-22 Last updated: 2016-04-22Bibliographically approved

Open Access in DiVA

fulltext(700 kB)4 downloads
File information
File name FULLTEXT01.pdfFile size 700 kBChecksum SHA-512
Type fulltextMimetype application/pdf

Search in DiVA

By author/editor
Bastani, Spencer

Search outside of DiVA

GoogleGoogle Scholar
Total: 4 downloads
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

Total: 31 hits
ReferencesLink to record
Permanent link

Direct link