Optimal Taxation with Household Production
AbstractThis paper suggests that the optimal tax system should favour market-produced services which are close substitutes for home-produced services. First, we modify the classical Corlett-Hague rule for optimal commodity taxation by showing that it may be optimal to impose a relatively low tax rate on consumer services even if such services are complements to leisure. Second, we find that when services and other goods are equally substitutable for leisure, so that uniform commodity taxation would be optimal in the absence of home production, the optimal tax structure will certainly involve a relatively low tax rate on consumer services.
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Bibliographic InfoPaper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 99-12.
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- NEP-ALL-2003-05-08 (All new papers)
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