Optimal Taxation and Optimal Tax Systems
AbstractThe theory of optimal taxation has , for the pas two decades , been the reigning normative approach of taxation. This paper argues that , in its current state, optimal tax theory is incomplete as a guide to action concerning many 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 collection taxes implies that the resource cost of implementing a tax system have been and will continue to be a critical determinant of appropriate tax policy. The paper first presents the three cornerstone propositions of optimal tax theory, and then it discusses the influence of these propositions on recent tax policy developments. It concludes by sketching an alternative to optimal taxation, called the theory of optimal tax systems, which embraces the insights of optimal taxation but also considers the technology of raising taxes and the constraints placed upon tax policy by that technology. The optimal tax systems perspective is shown to shed light on the choice of tax instruments, the problem of tax evasion, and the appropriate tax treatment of capital income.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by American Economic Association in its journal Journal of Economic Perspectives.
Volume (Year): 4 (1990)
Issue (Month): 1 (Winter)
Other versions of this item:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dan Usher, 1986.
"Tax Evasion and the Marginal Cost of Public Funds,"
637, Queen's University, Department of Economics.
- Mirrlees, J. A., 1976.
"Optimal tax theory : A synthesis,"
Journal of Public Economics,
Elsevier, vol. 6(4), pages 327-358, November.
- 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.
- Joel Slemrod, 1989.
"The Return To Tax Simplification: an Econometric Analysis,"
Public Finance Review,
, vol. 17(1), pages 3-27, January.
- Joel Slemrod, 1985. "The Return to Tax Simplification: An Econometric Analysis," NBER Working Papers 1756, National Bureau of Economic Research, Inc.
- Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-73, August.
- Joel Slemrod & Shlomo Yitzhaki, 1985.
"The Optimal Size of a Tax Collection Agency,"
NBER Working Papers
1759, National Bureau of Economic Research, Inc.
- Stern, N. H., 1976. "On the specification of models of optimum income taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 123-162.
- Lawrence H. Summers, 1987. "Should Tax Reform Level the Playing Field?," NBER Working Papers 2132, National Bureau of Economic Research, Inc.
- Joseph E. Stiglitz, 1987.
"Pareto Efficient and Optimal Taxation and the New New Welfare Economics,"
NBER Working Papers
2189, National Bureau of Economic Research, Inc.
- Stiglitz, Joseph E., 1987. "Pareto efficient and optimal taxation and the new new welfare economics," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 15, pages 991-1042 Elsevier.
- Auerbach, Alan J., 1985.
"The theory of excess burden and optimal taxation,"
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 2, pages 61-127
- Stern, Nicholas, 1982. "Optimum taxation with errors in administration," Journal of Public Economics, Elsevier, vol. 17(2), pages 181-211, March.
- Martin Feldstein, 1978.
"The Welfare Cost of Capital Income Taxation,"
in: Research in Taxation, pages 29-51
National Bureau of Economic Research, Inc.
- Roger H. Gordon & Joel Slemrod, 1988. "Do We Collect Any Revenue from Taxing Capital Income?," NBER Chapters, in: Tax Policy and the Economy: Volume 2, pages 89-130 National Bureau of Economic Research, Inc.
- Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
- 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.
- Sadka, Efraim, 1976. "On Income Distribution, Incentive Effects and Optimal Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 261-67, June.
- Joel Slemrod & Nikki Sorum, 1985. "The Compliance Cost of the U.S. Individual Income Tax System," NBER Working Papers 1401, National Bureau of Economic Research, Inc.
- C E McLure, 1984. "The evolution of tax advice and the taxation of capital income in the USA," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 2(3), pages 251-269, June.
- Heller, Walter P & Shell, Karl, 1974. "On Optimal Taxation with Costly Administration," American Economic Review, American Economic Association, vol. 64(2), pages 338-45, May.
- Hahn, Frank H., 1973. "On optimum taxation," Journal of Economic Theory, Elsevier, vol. 6(1), pages 96-106, February.
- Yitzhaki, Shlomo, 1979. "A Note on Optimal Taxation and Administrative Costs," American Economic Review, American Economic Association, vol. 69(3), pages 475-80, June.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.