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The Theory of Optimal Taxation: What is the Policy Relevance?

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  • Peter Birch Sørensen

    (Department of Economics, University of Copenhagen)

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    Abstract

    The paper discusses the implications of optimal tax theory for the debates on uniform commodity taxation and neutral capital income taxation. While strong administrative and political economy arguments in favor of uniform and neutral taxation remain, recent advances in optimal tax theory suggest that the information needed to implement the differentiated taxation prescribed by optimal tax theory may be easier to obtain than previously believed. The paper also points to the strong similarity between optimal commodity tax rules and the rules for optimal source-based capital income taxation.

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    File URL: http://www.econ.ku.dk/eprn_epru/Workings_Papers/wp-06-07.pdf
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    Bibliographic Info

    Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 06-07.

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    Length: 44 pages
    Date of creation: Aug 2006
    Date of revision:
    Handle: RePEc:kud:epruwp:06-07

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    Keywords: optimal taxation; uniform taxation; tax neutrality;

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    23. Sandmo, Agnar, 1974. "A Note on the Structure of Optimal Taxation," American Economic Review, American Economic Association, vol. 64(4), pages 701-06, September.
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