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Is commodity taxation unfair?

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  • Fleurbaey, Marc

Abstract

In a model where agents have unequal skills and heterogeneous preferences about consumption goods and leisure, this paper studies how to combine linear commodity taxes and non-linear income tax. It proposes a particular social welfare function on the basis of fairness principles. It then derives a simple criterion for evaluating the social welfare consequences of various tax schedules. Under the proposed approach, the optimal tax should have no commodity tax for some range of consumptions, and income redistribution would feature high subsidies to the working poor. It is also shown that, even when the income tax fails to be optimal, commodity taxes may not improve social welfare.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 90 (2006)
Issue (Month): 10-11 (November)
Pages: 1765-1787

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Handle: RePEc:eee:pubeco:v:90:y:2006:i:10-11:p:1765-1787

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Web page: http://www.elsevier.com/locate/inca/505578

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References

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Citations

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Cited by:
  1. Juan D. Moreno-Ternero, 2010. "Voting over piece-wise linear tax methods," Working Papers 2010-01, Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center.
  2. Alan Krause, 2007. "A Tax Reform Analysis of the Laffer Argument," Discussion Papers 07/10, Department of Economics, University of York.
  3. Valletta Giacomo, 2012. "Health, Fairness and Taxation," Research Memorandum 017, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  4. Alan Krause, 2009. "A general equilibrium analysis of the Laffer argument," Social Choice and Welfare, Springer, vol. 33(4), pages 601-615, November.
  5. Louis Kaplow, 2008. "Optimal Policy with Heterogeneous Preferences," NBER Working Papers 14170, National Bureau of Economic Research, Inc.
  6. Giacomo Valletta, 2014. "Health, fairness and taxation," Social Choice and Welfare, Springer, vol. 43(1), pages 101-140, June.

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