Two main results in traditional tax theory states the following. First, general taxes minimize the welfare loss from changed relative prices. Second, because the total public budget tends to exceed the optimal size, a leader (here named "troop leader") is needed in the budget process to prevent over-taxation. Nevertheless, differentiated taxes initiated by individual ministries generate a still larger proportion of total tax revenue, in particular under cover of taxing externalities such as environmental pollution.
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Paper provided by Aarhus School of Business - Department of Economics in its series Papers with number
00-8.
Length: 18 pages Date of creation: 2000 Date of revision: Handle: RePEc:fth:aascbu:00-8
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Find related papers by JEL classification: H0 - Public Economics - - General H4 - Public Economics - - Publicly Provided Goods Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
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