Taxation and Heterogeneous Preferences
Abstract
Nonlinear income taxes and linear commodity taxes are analyzed when people differ with respect to ability, high-skill agents have heterogeneous preferences, and neither individual abilities nor preferences are observable. We characterize pure income tax optima, which may be bunching or separating optima. In particular, the income tax may not be able to distinguish between those low-income people who are low-skill and those who have a strong preference for leisure. As is shown, there may still be an effect on the optimum income tax schedule, as it will depend on the composition of the population with respect to types of individuals. Finally, the paper addresses what can be achieved by commodity taxes when preferences are heterogeneous - in particular, with respect to targeting groups that the income tax is incapable of discriminating between.Download Info
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Bibliographic Info
Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 64 (2008)
Issue (Month): 2 (June)
Pages: 218-244
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Related research
Keywords: optimum taxation; heterogeneous preferences; asymmetric information;Other versions of this item:
- Sören Blomquist & Vidar Christiansen, 2004. "Taxation and Heterogeneous Preferences," CESifo Working Paper Series 1244, CESifo Group Munich.
- Blomquist, Sören & Christiansen, Vidar, 2004. "Taxation and Heterogeneous Preferences," Working Paper Series 2004:9, Uppsala University, Department of Economics.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
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