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Yet Another Reason to Tax Goods

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  • Costa, Carlos Eugênio da

Abstract

In this article we write a two period taxation model where: \QTR{it}{i)} private information changes through time; \QTR{it}{ii)} savings choices by an agent that are not observed, \QTR{it}{iii)} affect preferences conditional on the realization of types. The simultaneous appearance of these three elements cause optimal commodity tax to depend on off-equilibrium levels of savings. As a consequence, separability no longer suffices for the uniform taxation prescription of Atkinson and Stiglitz to obtain. In what regards capital income taxation we show that, in the most 'natural' cases, return on capital ought to be taxed

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Paper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 596.

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Date of creation: 01 Jul 2005
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Handle: RePEc:fgv:epgewp:596

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  1. Mikhail Golosov, 2007. "Optimal Taxation With Endogenous Insurance Markets," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 122(2), pages 487-534, 05.
  2. Joseph E. Stiglitz, 1981. "Self-Selection and Pareto Efficient Taxation," NBER Working Papers, National Bureau of Economic Research, Inc 0632, National Bureau of Economic Research, Inc.
  3. Mikhail Golosov & Narayana R. Kocherlakota & Aleh Tsyvinski, 2001. "Optimal indirect and capital taxation," Working Papers, Federal Reserve Bank of Minneapolis 615, Federal Reserve Bank of Minneapolis.
  4. Dewatripont, Mathias, 1988. "Commitment through Renegotiation-Proof Contracts with Third Parties," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 55(3), pages 377-89, July.
  5. Cremer, Helmuth & Pestieau, Pierre & Rochet, Jean-Charles, 1999. "Capital Income Taxation when Inherited wealth is not Observable," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 109, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2001.
  6. Brunner, Johann K., 1993. "A note on the optimum income tax," Journal of Public Economics, Elsevier, Elsevier, vol. 50(3), pages 445-451, March.
  7. Emmanuel Saez, 2000. "The Desirability of Commodity Taxation under Non-Linear Income Taxation and Heterogeneous Tastes," NBER Working Papers, National Bureau of Economic Research, Inc 8029, National Bureau of Economic Research, Inc.
  8. Deaton, Angus, 1979. "Optimally uniform commodity taxes," Economics Letters, Elsevier, Elsevier, vol. 2(4), pages 357-361.
  9. Cremer, Helmuth & Gahvari, Firouz, 1995. "Uncertainty, Optimal Taxation and the Direct versus Indirect Tax Controversy," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 105(432), pages 1165-79, September.
  10. Fernandes, Ana & Phelan, Christopher, 2000. "A Recursive Formulation for Repeated Agency with History Dependence," Journal of Economic Theory, Elsevier, Elsevier, vol. 91(2), pages 223-247, April.
  11. Narayana R. Kocherlakota, 2004. "Wedges and Taxes," American Economic Review, American Economic Association, American Economic Association, vol. 94(2), pages 109-113, May.
  12. CREMER, Helmuth & PESTIEAU, Pierre & ROCHET, Jean-Charles, 1999. "Direct versus indirect taxation: the design of the tax structure revisited," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1999010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Cremer, Helmuth & Gahvari, Firouz, 1999. " Uncertainty, Commitment, and Optimal Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, Association for Public Economic Theory, vol. 1(1), pages 51-70.
  14. Hammond, Peter J, 1987. "Markets as Constraints: Multilateral Incentive Compatibility in Continuum Economies," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 54(3), pages 399-412, July.
  15. Guesnerie,Roger, 1998. "A Contribution to the Pure Theory of Taxation," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521629560.
  16. Besley, Timothy & Jewitt, Ian, 1995. "Uniform taxation and consumer preferences," Journal of Public Economics, Elsevier, Elsevier, vol. 58(1), pages 73-84, September.
  17. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(114), pages 175-208, April.
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  19. Mirrlees, J. A., 1976. "Optimal tax theory : A synthesis," Journal of Public Economics, Elsevier, Elsevier, vol. 6(4), pages 327-358, November.
  20. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, Elsevier, vol. 6(1-2), pages 55-75.
  21. Ebert, Udo, 1992. "A reexamination of the optimal nonlinear income tax," Journal of Public Economics, Elsevier, Elsevier, vol. 49(1), pages 47-73, October.
  22. Hammond, Peter J, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 46(2), pages 263-82, April.
  23. Naito, Hisahiro, 1999. "Re-examination of uniform commodity taxes under a non-linear income tax system and its implication for production efficiency," Journal of Public Economics, Elsevier, Elsevier, vol. 71(2), pages 165-188, February.
  24. Cooter, Robert D, 1978. "Optimal Tax Schedules and Rates: Mirrlees and Ramsey," American Economic Review, American Economic Association, American Economic Association, vol. 68(5), pages 756-68, December.
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Cited by:
  1. Tsyvinski, A. & Golosov, M., 2004. "Optimal Taxation with Endogenous Insurance Markets," 2004 Meeting Papers, Society for Economic Dynamics 124, Society for Economic Dynamics.
  2. Costa, Carlos Eugênio da & Maestri, Lucas Jóver, 2004. "The risk-properties of human capital and the design of government policies," Economics Working Papers (Ensaios Economicos da EPGE), FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) 554, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).

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