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A generalization of the Deaton-Hellwig results on uniform commodity taxation

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  • Boadway, Robin
  • Cuff, Katherine

Abstract

Deaton (1979) showed that with an optimal linear progressive tax, commodity taxes are redundant if preferences are weakly separable between goods and labour and quasi-homothetic in goods. Hellwig (2009) later showed that any allocation with differential commodity taxes and an arbitrary linear progressive income tax is Pareto-dominated by one with uniform commodity taxes and a reformed linear progressive tax. We show that Deaton’s theorem and Hellwig’s extension apply a) with a piecewise linear income tax and tax credits, b) when some individuals earn no income either by choice or involuntarily, and c) when individual preferences for leisure differ.

Suggested Citation

  • Boadway, Robin & Cuff, Katherine, 2022. "A generalization of the Deaton-Hellwig results on uniform commodity taxation," Journal of Public Economics, Elsevier, vol. 214(C).
    • Handle: RePEc:eee:pubeco:v:214:y:2022:i:c:s0047272722001335
    DOI: 10.1016/j.jpubeco.2022.104731
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    Cited by:

    1. Robin Boadway & Katherine Cuff, 2023. "The Case for Uniform Commodity Taxation: A Tax Reform Approach," Hacienda Pública Española / Review of Public Economics, IEF, vol. 244(1), pages 79-109, March.

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    More about this item

    Keywords

    Optimal income tax; Commodity taxation; Piecewise linear income tax;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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