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Optimal taxation as a guide to tax policy: a survey

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  • Chris Heady

Abstract

The purpose of this paper is to survey the field of optimal taxation. In order to provide a focus, and bearing in mind the interests of many of the readers of Fiscal Studies, the paper will concentrate on attempting to answer the question of whether, and to what extent, the literature on optimal taxation can provide guidance in the practical determination of tax policy. This focus means that the survey will be selective, and will neglect many intellectually interesting results that have not yet been developed to provide clear policy conclusions. It is an interest in tax policy that has led a number of economists to undertake research on optimal taxation, and so one might expect the link between the research and the policy-making to be clear. However, the level of abstraction of much of the research, together with the extensive use of (sometimes difficult) mathematics, has caused many policy-orientated people to discount its practical value. It is dismissed as being “academic’, with little or no practical value. For some, the mere title of the field is off-putting: how can any aspect of public policy, with all its political constraints and administrative problems, ever hope to be optimal? Particularly, how can anything as unpopular as taxation be described in such terms?

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Bibliographic Info

Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 14 (1993)
Issue (Month): 1 (February)
Pages: 15-41

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Handle: RePEc:ifs:fistud:v:14:y:1993:i:1:p:15-41

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References

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  1. Ahmad,Etisham & Stern,Nicholas, 1991. "The Theory and Practice of Tax Reform in Developing Countries," Cambridge Books, Cambridge University Press, number 9780521397421.
  2. Richard Blundell, 1992. "Labour supply and taxation: a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 13(3), pages 15-40, January.
  3. Myles, Gareth D., 1989. "Ramsey tax rules for economies with imperfect competition," Journal of Public Economics, Elsevier, vol. 38(1), pages 95-115, February.
  4. 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.
  5. Deaton, Angus, 1979. "Optimally uniform commodity taxes," Economics Letters, Elsevier, vol. 2(4), pages 357-361.
  6. Ebrahimi, Ahmad & Heady, Christopher, 1987. "Tax Design and Household Composition," Economic Journal, Royal Economic Society, vol. 98(390), pages 83-96, Supplemen.
  7. Allen, Franklin, 1982. "Optimal linear income taxation with general equilibrium effects on wages," Journal of Public Economics, Elsevier, vol. 17(2), pages 135-143, March.
  8. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Heady, Christopher, 1987. "A Diagrammatic Approach to Optimal Commodity Taxation," Public Finance = Finances publiques, , vol. 42(2), pages 250-63.
  10. Heady, Christopher J. & Mitra, Pradeep K., 1992. "Taxation in decentralizing socialist economies : the case of China," Policy Research Working Paper Series 820, The World Bank.
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Citations

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Cited by:
  1. Parry, Ian W. H., 2004. "Are emissions permits regressive?," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 364-387, March.
  2. Sebastian Gundel, Heiko Peters, . "Wie gut sind Immigranten in den deutschen Arbeitsmarkt integriert? Löhne von Immigranten und Deutschen im Vergleich," Working Papers 201155, Institute of Spatial and Housing Economics, Munster Universitary.
  3. Whitehouse, Edward, 1999. "The tax treatment of funded pensions," Social Protection Discussion Papers 20126, The World Bank.
  4. David Madden, 1995. "An analysis of indirect tax reform in Ireland in the 1980s," Fiscal Studies, Institute for Fiscal Studies, vol. 16(1), pages 18-37, May.
  5. John Creedy, 2009. "The Personal Income Tax Structure: Theory and Policy," Department of Economics - Working Papers Series 1063, The University of Melbourne.
  6. Robin Boadway & David Wildasin, 1994. "Taxation and savings: a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 15(3), pages 19-63, August.
  7. Agell, Jonas, 2003. "Efficiency and Equality in the Labour Market," Research Papers in Economics 2003:11, Stockholm University, Department of Economics.
  8. Judith Yates, 2003. "'The more things change?' An overview of Australia's recent home ownership policies," European Journal of Housing Policy, Taylor and Francis Journals, vol. 3(1), pages 1-33, January.
  9. Sanjit Dhami & Ali Al-Nowaihi, 2006. "A Simple Model Of Optimal Tax Systems: Taxation, Measurement And Uncertainty," Manchester School, University of Manchester, vol. 74(6), pages 645-669, December.
  10. Moller, Lars Christian, 2012. "Fiscal policy in Colombia : tapping its potential for a more equitable society," Policy Research Working Paper Series 6092, The World Bank.
  11. François Legendre, 1993. "Évaluation empirique de quelques réformes de l'impôt sur le revenu," Économie et Prévision, Programme National Persée, vol. 110(4), pages 35-62.
  12. James, Simon & Edwards, Alison, 2008. "Developing Tax Policy in a Complex and Changing World," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, vol. 38(1), pages 35-53, March.
  13. Kalina Koleva & Jean-Marie Monnier, 2006. "La nature juridique de l'impôt dans l'ancienne et la nouvelle économie du droit fiscal," Cahiers de la Maison des Sciences Economiques r06057, Université Panthéon-Sorbonne (Paris 1).
  14. Sanjit Dhami, 2002. "Optimal Consumption Taxes and Social Security Under Tax Measurement Problems and Uncertainty," International Tax and Public Finance, Springer, vol. 9(6), pages 673-685, November.
  15. Dan Anderberg & Alessandro Balestrino, 2000. "Household Production and the Design of the Tax Structure," International Tax and Public Finance, Springer, vol. 7(4), pages 563-584, August.
  16. John Creedy & Nicolas Hérault, 2009. "Optimal Marginal Income Tax Reforms: A Microsimulation Analysis," Melbourne Institute Working Paper Series wp2009n23, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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