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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 Graduate School of Economics, 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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Cited by:
  1. Mikhail Golosov, 2007. "Optimal Taxation With Endogenous Insurance Markets," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 487-534, 05.
  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) 554, Graduate School of Economics, Getulio Vargas Foundation (Brazil).

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