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On the efficiency of uniform taxation in a many-consumer economy

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  • Michael Smart

Abstract

We derive necessary and sufficient conditions on preferences for uniform taxation to be Pareto efficient in a many-consumer economy. We argue that uniformity is desirable only under conditions far more restrictive than suggested in previous literature, most of which is based on analysis of a single-consumer economy. When the only feasible direct tax is a poll tax, uniformity holds if and only if consumers have identical, linear Engel curves. When income can be redistributed optimally through direct taxes, uniformity also holds if wage elasticities of demand for all goods are constant and equal for all consumers.

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File URL: http://www.economics.utoronto.ca/public/workingPapers/UT-ECIPA-MSMART-97-01.ps
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File URL: http://www.economics.utoronto.ca/public/workingPapers/UT-ECIPA-MSMART-97-01.pdf
File Function: MainText
Download Restriction: no

Bibliographic Info

Paper provided by University of Toronto, Department of Economics in its series Working Papers with number msmart-97-01.

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Length: 16 pages
Date of creation: 25 Jun 1997
Date of revision:
Handle: RePEc:tor:tecipa:msmart-97-01

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  1. Deaton, Angus, 1979. "The Distance Function in Consumer Behaviour with Applications to Index Numbers and Optimal Taxation," Review of Economic Studies, Wiley Blackwell, vol. 46(3), pages 391-405, July.
  2. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
  3. Deaton, Angus, 1979. "Optimally uniform commodity taxes," Economics Letters, Elsevier, vol. 2(4), pages 357-361.
  4. Besley, Timothy & Jewitt, Ian, 1995. "Uniform taxation and consumer preferences," Journal of Public Economics, Elsevier, vol. 58(1), pages 73-84, September.
  5. Sadka, Efraim, 1977. "A theorem on uniform taxation," Journal of Public Economics, Elsevier, vol. 7(3), pages 387-391, June.
  6. Angus Deaton, 1979. "Optimal Taxes and the Structure of Preferences," Working Papers 506, Princeton University, Department of Economics, Industrial Relations Section..
  7. Blackorby, C. & Davidson, R. & Schworm, W., 1990. "Economies With A Two-Sector Representation," G.R.E.Q.A.M. 90a17, Universite Aix-Marseille III.
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