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Tagging and redistributive taxation

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  • Robin BOADWAY
  • Pierre PESTIEAU

Abstract

We study optimal redistributive taxes when the population can be disaggregated into tagged groups. Under reasonable circumstances, the tax system will be more redistributive in the tagged group with the higher proportion of high-ability persons. We extend the analysis to the case where the tag reflects differences in resources required to achieve a given level of utility. The compensation given for needs depends on whether the income tax structure is differentiated by needs groups.

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Bibliographic Info

Article provided by ENSAE in its journal Annals of Economics and Statistics.

Volume (Year): (2006)
Issue (Month): 83-84 ()
Pages: 123-147

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Handle: RePEc:adr:anecst:y:2006:i:83-84:p:05

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References

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  1. Immonen, Ritva, et al, 1998. "Tagging and Taxing: The Optimal Use of Categorical and Income Information in Designing Tax/Transfer Schemes," Economica, London School of Economics and Political Science, vol. 65(258), pages 179-92, May.
  2. HAMILTON, Jonathan & PESTIEAU, Pierre, 2002. "Optimal income taxation and the ability distribution: implications for migration equilibria," CORE Discussion Papers 2002036, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Robin Boadway & Michael Keen, 1999. "Redistribution," Working Papers 983, Queen's University, Department of Economics.
  4. Nicholas Rowe & Frances Woolley, 1996. "The Efficiency Case of Universality," Carleton Economic Papers 96-05, Carleton University, Department of Economics, revised May 1999.
  5. Michael Michael Keen, 1991. "Needs and Targeting," Working Papers 822, Queen's University, Department of Economics.
  6. Laurence, JACQUET & Bruno, VAN DER LINDEN, 2003. "The Normative Analysis of ‘Tagging’ Revisited : Dealing with Stigmatization," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003030, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  7. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
  8. Guesnerie Roger & Seade Jesus, 1981. "Nonlinear pricing in a finite economy," CEPREMAP Working Papers (Couverture Orange) 8118, CEPREMAP.
  9. Robin Boadway & Pierre Pestieau, 2002. "Indirect Taxation and Redistribution: The Scope of the Atkinson-Stiglitz Theorem," Working Papers 1005, Queen's University, Department of Economics.
  10. Ritva Immonen & Ravi Kanbur & Michael Keen & Matti Tuomala, 1994. "Tagging and taxing: the optimal use of categorical and income information in designing tax/transfer schemes," IFS Working Papers W94/05, Institute for Fiscal Studies.
  11. Craig Brett & John A. Weymark, 2008. "Public Good Provision And The Comparative Statics Of Optimal Nonlinear Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 255-290, 02.
  12. Viard, Alan D, 2001. " Optimal Categorical Transfer Payments: The Welfare Economics of Limited Lump-Sum Redistribution," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 3(4), pages 483-500.
  13. CREMER, Helmuth & PESTIEAU, Pierre & ROCHET, Jean-Charles, 1999. "Direct versus indirect taxation: the design of the tax structure revisited," CORE Discussion Papers 1999010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
  15. Diamond, P., 1994. "Optimal Income Taxation: An Exemple with a U-Shaped Pattern of Optimal Marginal Tax Rates," Working papers 94-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  16. Robin Boadway & Manuel Leite-Monteiro & Maurice Marchand & Pierre Pestieau, 2002. "Social Insurance and Redistribution," Working Papers 1004, Queen's University, Department of Economics.
  17. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  18. Alan D. Viard, 2001. "Some Results on the Comparative Statics of Optimal Categorical Transfer Payments," Public Finance Review, , vol. 29(2), pages 148-180, March.
  19. Blackorby, Charles & Donaldson, David, 1994. "Information and Intergroup Transfers," American Economic Review, American Economic Association, vol. 84(2), pages 440-47, May.
  20. Virginia Hernanz & Franck Malherbet & Michele Pellizzari, 2004. "Take-Up of Welfare Benefits in OECD Countries: A Review of the Evidence," OECD Social, Employment and Migration Working Papers 17, OECD Publishing.
  21. Pollak, Robert A, 1971. "Additive Utility Functions and Linear Engel Curves," Review of Economic Studies, Wiley Blackwell, vol. 38(116), pages 401-14, October.
  22. Parsons, Donald O., 1996. "Imperfect 'tagging' in social insurance programs," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 183-207, October.
  23. Robin Boadway, 2003. "The Theory and Practice of Equalization," Working Papers 1016, Queen's University, Department of Economics.
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Citations

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Cited by:
  1. Craig Brett & John Weymark, 2008. "Optimal Nonlinear Taxation of Income and Savings without Commitment," Vanderbilt University Department of Economics Working Papers 0805, Vanderbilt University Department of Economics.
  2. Craig Brett & John A. Weymark, 2004. "Public Good Provision and the Comparative Statics of Optimal Nonlinear Income Taxation," Vanderbilt University Department of Economics Working Papers 0415, Vanderbilt University Department of Economics.
  3. Craig Brett, 2012. "The effects of population aging on optimal redistributive taxes in an overlapping generations model," International Tax and Public Finance, Springer, vol. 19(6), pages 777-799, December.
  4. Craig Brett & John A. Weymark, 2005. "Optimal Nonlinear Taxation of Income and Savings in a Two Class Economy," Vanderbilt University Department of Economics Working Papers 0525, Vanderbilt University Department of Economics.
  5. Cremer, Helmuth & Gahvari, Firouz & Pestieau, Pierre, 2009. "Accidental bequests: a curse for the rich and a boon for the poor," TSE Working Papers 09-119, Toulouse School of Economics (TSE).
  6. Leung, Tin Cheuk & Yazici, Hakki, 2011. "On the Optimal Skill Distribution in a Mirrleesian Economy," MPRA Paper 32596, University Library of Munich, Germany.
  7. Brett, Craig & Weymark, John A., 2008. "The impact of changing skill levels on optimal nonlinear income taxes," Journal of Public Economics, Elsevier, vol. 92(7), pages 1765-1771, July.
  8. Spencer Bastani, 2013. "Gender-based and couple-based taxation," International Tax and Public Finance, Springer, vol. 20(4), pages 653-686, August.
  9. Bastani, Spencer & Blomquist, Sören & Micheletto, Luca, 2010. "Public Provision of Private Goods, Tagging and Optimal Income Taxation with Heterogeneity in Needs," Working Paper Series, Center for Fiscal Studies 2010:14, Uppsala University, Department of Economics.
  10. Matthew C. Weinzierl, 2012. "Why do we Redistribute so Much but Tag so Little? The principle of equal sacrifice and optimal taxation," NBER Working Papers 18045, National Bureau of Economic Research, Inc.
  11. Laurence JACQUET & Etienne LEHMANN, 2014. "Optimal Nonlinear Income Taxation with Multidimensional Types: The Case with Heterogeneous Behavioral Responses," THEMA Working Papers 2014-01, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  12. Stuart Adam, 2005. "Measuring the marginal efficiency cost of redistribution in the UK," IFS Working Papers W05/14, Institute for Fiscal Studies.

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