Telecommunications Tax Design: The Role of A Preexisting Labor Tax Distortion
The paper assesses the effects of a preexisting labor tax on the relative efficiency of a capital tax and a sales tax on the telecommunications sector. Public finance theory predicts that the efficiency costs of a sales tax increase when there is a preexisting labor tax, but the theory is ambiguous as to the effect of the preexisting labor tax on the efficiency costs of a capital tax. Using a numerical general equilibrium model I show that the efficiency costs of both taxes are of the same orders of magnitude in a first-best setting. But when there is a preexisting labor tax, the capital tax is more efficient.
Volume (Year): 55 (2002)
Issue (Month): N. 1 (March)
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- Parry, Ian W. H. & Williams, Roberton III & Goulder, Lawrence H., 1999.
"When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets,"
Journal of Environmental Economics and Management,
Elsevier, vol. 37(1), pages 52-84, January.
- Ian W. H. Parry & Roberton C. Williams III & Lawrence H. Goulder, 1997. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," NBER Working Papers 5967, National Bureau of Economic Research, Inc.
- Parry, Ian & Goulder, Lawrence & Williams III, Roberton, 1997. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," Discussion Papers dp-97-18-rev, Resources For the Future.
- Lawrence H. Goulder & Roberton C. Williams III, 1999. "The Usual Excess-Burden Approximation Usually Doesn't Come Close," NBER Working Papers 7034, National Bureau of Economic Research, Inc.
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