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

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Author Info
Peter Birch Sørensen (Department of Economics, University of Copenhagen)
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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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
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Handle: RePEc:kud:epruwp:06-07

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Related research
Keywords: optimal taxation; uniform taxation; tax neutrality;

Find related papers by JEL classification:
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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