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A Revelation Approach To Optimal Taxation

Author

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  • Jorge Martinez-Vazquez

    (Georgia State University)

  • Mark Rider

    (Office of Tax Analysis, U.S. Department of the Treasury)

Abstract

Since the seminal work of Ramsey (1927) and especially Diamond and Mirrlees (1971), a large body of literature has striven to identify rules characterizing optimal tax structures. The fundamental limitation of such an approach has been the lack of information necessary to implement the rules derived in the optimal tax literature. This article offers an alternative approach to the optimal tax problem. The authors present a mechanism that induces individuals to honestly reveal the total tax burden they bear under alternative tax structures. Under certain conditcons, the mechanism could conceptually be used to find Ramsey's solution to optimal commodity taxation. The article also illustrates how the revelation approach can be operationalized by experiments designed to test theorems derived m the optimal tax literature.

Suggested Citation

  • Jorge Martinez-Vazquez & Mark Rider, 1996. "A Revelation Approach To Optimal Taxation," Public Finance Review, , vol. 24(4), pages 439-463, October.
    • Handle: RePEc:sae:pubfin:v:24:y:1996:i:4:p:439-463
    DOI: 10.1177/109114219602400402
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    References listed on IDEAS

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    Cited by:

    1. Lucy F. Ackert & Jorge Martinez-Vazquez & Mark Rider, 2004. "Tax Policy Design in The Presence of Social Preferences: Some Experimental Evidence," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0425, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

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