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Income Tax, Commodity Tax and Environmental Policy

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  • Jukka Pirttilä
  • Matti Tuomala

    ()

Abstract

Using the self-selection approach to tax analysis, thepaper analyses the impact of environmental externalities on Pareto-efficientnon-linear income tax, proportional commodity taxes and publicexpenditure. Consideration of externalities within this frameworkreveals intuitive insights into environmental tax policy, suggestingthat some earlier conclusions drawn in the relevant literaturemight be misleading. The results indicate that, while the externality‘sdirect harmful impact raises marginal tax rates, the influencethrough the self-selection constraint tends to decrease the rise.We also derive conditions under which the Pigovian tax can bedetermined purely on the basis of internalizing the externality. Copyright Kluwer Academic Publishers 1997

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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 4 (1997)
Issue (Month): 3 (July)
Pages: 379-393

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Handle: RePEc:kap:itaxpf:v:4:y:1997:i:3:p:379-393

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: Pareto-efficient taxation; Public goods; Environmental externalities; Non-linear income taxation;

References

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  1. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
  2. de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, vol. 84(4), pages 1085-89, September.
  3. 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.
  4. Boadway, Robin & Keen, Michael, 1993. "Public Goods, Self-Selection and Optimal Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 463-78, August.
  5. J. A. Mirrlees, 1976. "Optimal Tax Theory: A Synthesis," Working papers 176, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Sheshinski, Eytan, 2004. "On atmosphere externality and corrective taxes," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 727-734, March.
  7. Stephen Smith, 1992. "Taxation and the environment: a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 13(4), pages 21-57, January.
  8. Atkinson, Anthony B & Stern, N H, 1974. "Pigou, Taxation and Public Goods," Review of Economic Studies, Wiley Blackwell, vol. 41(1), pages 119-28, January.
  9. Bovenberg, A Lans & van der Ploeg, Frederick, 1992. "Environmental Policy, Public Finance and the Labour Market in a Second-best World," CEPR Discussion Papers 745, C.E.P.R. Discussion Papers.
  10. Christiansen, Vidar, 1984. "Which commodity taxes should supplement the income tax?," Journal of Public Economics, Elsevier, vol. 24(2), pages 195-220, July.
  11. Stern, Nicholas, 1982. "Optimum taxation with errors in administration," Journal of Public Economics, Elsevier, vol. 17(2), pages 181-211, March.
  12. Oswald, Andrew J., 1983. "Altruism, jealousy and the theory of optimal non-linear taxation," Journal of Public Economics, Elsevier, vol. 20(1), pages 77-87, February.
  13. Tuomala, Matti, 1990. "Optimal Income Tax and Redistribution," OUP Catalogue, Oxford University Press, number 9780198286059, September.
  14. Sandmo, Agnar, 1980. "Anomaly and Stability in the Theory of Externalities," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 799-807, June.
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Citations

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Cited by:
  1. Parry, Ian & Walls, Margaret & Sigman, Hilary & Williams III, Roberton, 2005. "The Incidence of Pollution Control Policies," Discussion Papers dp-05-24, Resources For the Future.
  2. Paul Eckerstorfer, 2011. "Relative Consumption Concerns and the Optimal Tax Mix," NRN working papers 2011-12, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  3. Aronsson, Thomas & Blomquist, Soren, 2003. "Optimal taxation, global externalities and labor mobility," Journal of Public Economics, Elsevier, vol. 87(12), pages 2749-2764, December.
  4. Paul Eckerstorfer, 2013. "Optimal Redistributive Taxation in a Multiexternality Model," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 69(1), pages 115-128, March.
  5. Matti Tuomala & Sanna Tenhunen, 2013. "On the design of an optimal non-linear tax/pension system with habit formation," International Tax and Public Finance, Springer, vol. 20(3), pages 485-512, June.
  6. Hoel, Michael, 2008. "Environmental Taxes in an Economy with Distorting Taxes and a Heterogeneous Population," Memorandum 04/2008, Oslo University, Department of Economics.
  7. Russo, Antonio, 2012. "Pricing of Transport Networks, Redistribution and Optimal Taxation," TSE Working Papers 12-353, Toulouse School of Economics (TSE).
  8. Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 2001. "Environmental Taxes with Heterogeneous Consumers: An Application to Energy Consumption in France," IDEI Working Papers 127, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2002.
  9. Louis Kaplow, 2006. "Optimal Control of Externalities in the Presence of Income Taxation," NBER Working Papers 12339, National Bureau of Economic Research, Inc.
  10. Micheletto, Luca, 2008. "Redistribution and optimal mixed taxation in the presence of consumption externalities," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2262-2274, October.
  11. Cremer, Helmuth & Gahvari, Firouz, 2001. "Second-best taxation of emissions and polluting goods," Journal of Public Economics, Elsevier, vol. 80(2), pages 169-197, May.
  12. CANTA, Chiara & LEROUX, Marie-Louise, 2013. "Public and private hospitals, congestion, and redistribution," CORE Discussion Papers 2013041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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