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A New Approach to Optimal Commodity Taxation

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  • Stefan Homburg

Abstract

This paper makes a fresh attempt at characterizing optimal commodity taxes. Under the usual assumptions, an extremely simple expression for second-best commodity taxes is derived, showing tax rates as functions of observable variables only, rather than as functions of unobservable variables such as compensated cross-elasticities. The main formula is independent of special preferences and of the number of commodities. It has a simple economic meaning and could be particularly useful for empirical research. Examples and remarks on the normalization problem are provided.

Suggested Citation

  • Stefan Homburg, 2006. "A New Approach to Optimal Commodity Taxation," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(3), pages 323-338, September.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200609)62:3_323:anatoc_2.0.tx_2-n
    DOI: 10.1628/001522106X153392
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    Cited by:

    1. Homburg, Stefan, 2010. "Allgemeine Steuerlehre: Kapitel 1. Grundbegriffe der Steuerlehre," EconStor Books, ZBW - Leibniz Information Centre for Economics, number 92547.
    2. Yoshitomo Ogawa, 2007. "The optimal commodity tax structure in a four-good model," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(6), pages 657-671, December.
    3. Ulrich van Suntum, "undated". "Income Taxes, Death Taxes, and Optimal Consumption-Leisure-Savings-Choice," Working Papers 200124, Institute of Spatial and Housing Economics, Munster Universitary.
    4. van Suntum, Ulrich, 2008. "Income taxes, death taxes, and optimal consumption-leisure-savings-choice," CAWM Discussion Papers 4, University of Münster, Münster Center for Economic Policy (MEP).

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    More about this item

    Keywords

    optimal commodity taxation; Ramsey rule;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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