On the undesirability of commodity taxation even when income taxation is not optimal
An important result due to Atkinson and Stiglitz (1976) is that differential commodity taxation is not optimal in the presence of an optimal nonlinear income tax (given weak separability of utility between labor and all consumption goods). This article demonstrates that their conclusion holds regardless of whether the income tax is optimal. In particular, given any commodity tax and income tax system, differential commodity taxation can be eliminated in a manner that results in a Pareto improvement. Also, differential commodity taxation can be proportionally reduced so as to generate a Pareto improvement. In addition, for commodity tax reforms that do not eliminate or proportionally reduce differential taxation, a simple efficiency condition is offered for determining whether a Pareto improvement is possible.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Laroque, Guy R., 2005.
"Indirect taxation is superfluous under separability and taste homogeneity: a simple proof,"
Elsevier, vol. 87(1), pages 141-144, April.
- Guy Laroque, 2004. "Indirect Taxation is Superfluous under Separability and Taste Homogeneity : A Simple Proof," Working Papers 2004-23, Centre de Recherche en Economie et Statistique.
- Louis Kaplow, 2004. "On the (Ir)Relevance of Distribution and Labor Supply Distortion to Government Policy," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 159-175, Fall.
- Cremer, Helmuth & Pestieau, Pierre & Rochet, Jean-Charles, 2001.
"Direct versus Indirect Taxation: The Design of the Tax Structure Revisted,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(3), pages 781-799, August.
- CREMER, Helmuth & PESTIEAU, Pierre & ROCHET, Jean-Charles, 1999. "Direct versus indirect taxation: the design of the tax structure revisited," CORE Discussion Papers 1999010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- CREMER, Helmuth & PESTIEAU , Pierre & ROCHET, Jean-Charles, "undated". "Direct versus indirect taxation: the design of the tax structure revisited," CORE Discussion Papers RP 1528, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- J. A. Mirrlees, 1976.
"Optimal Tax Theory: A Synthesis,"
176, Massachusetts Institute of Technology (MIT), Department of Economics.
- Maurice Marchand & Pierre Pestieau & María Racionero, 2003.
"Optimal redistribution when different workers are indistinguishable,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 36(4), pages 911-922, November.
- MARCHAND, Maurice & PESTIEAU, Pierre & RACIONERO, Maria, "undated". "Optimal redistribution when different workers are indistinguishable," CORE Discussion Papers RP 1701, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- MARCHAND, Maurice & PESTIEAU, Pierre & DEL MAR RACIONERO, Maria, 2003. "Optimal redistribution when different workers are indistinguishable," CORE Discussion Papers 2003018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Ordover, J. A. & Phelps, E. S., 1979. "The concept of optimal taxation in the overlapping-generations model of capital and wealth," Journal of Public Economics, Elsevier, vol. 12(1), pages 1-26, August.
- Christiansen, Vidar, 1984. "Which commodity taxes should supplement the income tax?," Journal of Public Economics, Elsevier, vol. 24(2), pages 195-220, July.
- Emmanuel Saez, 2002.
"Direct or Indirect Tax Instruments for Redistribution: Short-run versus Long-run,"
NBER Working Papers
8833, National Bureau of Economic Research, Inc.
- Saez, Emmanuel, 2004. "Direct or indirect tax instruments for redistribution: short-run versus long-run," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 503-518, March.
- Konishi, Hideo, 1995. "A Pareto-improving commodity tax reform under a smooth nonlinear income tax," Journal of Public Economics, Elsevier, vol. 56(3), pages 413-446, March.
- C. C. Yang & Hans Haller, 1993. "On Directions of Commodity Tax Reform in the Presence of a Given Non-linear Income Tax Schedule," Canadian Journal of Economics, Canadian Economics Association, vol. 26(2), pages 469-480, May.
- Joseph E. Stiglitz, 1987.
"Pareto Efficient and Optimal Taxation and the New New Welfare Economics,"
NBER Working Papers
2189, National Bureau of Economic Research, Inc.
- Stiglitz, Joseph E., 1987. "Pareto efficient and optimal taxation and the new new welfare economics," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 15, pages 991-1042 Elsevier.
- Deaton, Angus, 1979. "Optimally uniform commodity taxes," Economics Letters, Elsevier, vol. 2(4), pages 357-361.
- Saez, Emmanuel, 2002.
"The desirability of commodity taxation under non-linear income taxation and heterogeneous tastes,"
Journal of Public Economics,
Elsevier, vol. 83(2), pages 217-230, February.
- Emmanuel Saez, 2000. "The Desirability of Commodity Taxation under Non-Linear Income Taxation and Heterogeneous Tastes," NBER Working Papers 8029, National Bureau of Economic Research, Inc.
- Naito, Hisahiro, 1999. "Re-examination of uniform commodity taxes under a non-linear income tax system and its implication for production efficiency," Journal of Public Economics, Elsevier, vol. 71(2), pages 165-188, February.
- 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.
- Hylland, Aanund & Zeckhauser, Richard, 1979. " Distributional Objectives Should Affect Taxes but not Program Choice or Design," Scandinavian Journal of Economics, Wiley Blackwell, vol. 81(2), pages 264-284.
When requesting a correction, please mention this item's handle: RePEc:eee:pubeco:v:90:y:2006:i:6-7:p:1235-1250. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.