Optimal tax mix with merit goods
This paper deals with optimal taxation in a two-class economy with two private commodities and labour. We derive optimal nonlinear income and linear commodity taxes in the presence of merit goods. We formulate merit good arguments via a pathology of individual choice. We assume weak separability between consumption and leisure and show that the standard optimal tax results are modified due to merit good considerations. We first find a subsidy on the merit good. Secondly, optimal income marginal tax rates are also shown to dioeer from the standard literature: it is positive on high-ability individuals and on low-ability individuals it is ambiguous because of a dampening eoeect due to merit good considerations. Finally, we derive the effective marginal tax rates
|Date of creation:||01 Jan 1998|
|Contact details of provider:|| Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)|
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
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.:
- Pazner, Elisha A, 1972. "Merit Wants and the Theory of Taxation," Public Finance = Finances publiques, , vol. 27(4), pages 460-472.
- Mirrlees, J. A., 1976.
"Optimal tax theory : A synthesis,"
Journal of Public Economics,
Elsevier, vol. 6(4), pages 327-358, November.
- J. A. Mirrlees, 1976. "Optimal Tax Theory: A Synthesis," Working papers 176, Massachusetts Institute of Technology (MIT), Department of Economics.
- Christiansen, Vidar, 1984. "Which commodity taxes should supplement the income tax?," Journal of Public Economics, Elsevier, vol. 24(2), pages 195-220, July.
- Neary, J. P. & Roberts, K. W. S., 1980. "The theory of household behaviour under rationing," European Economic Review, Elsevier, vol. 13(1), pages 25-42, January.
- Neary, J.P & Roberts, K.W.S, 1978. "The Theory of Household Behaviour under Rationing," The Warwick Economics Research Paper Series (TWERPS) 132, University of Warwick, Department of Economics.
- Tuomala, Matti, 1990. "Optimal Income Tax and Redistribution," OUP Catalogue, Oxford University Press, number 9780198286059.
- Besley, Timothy, 1988. "A simple model for merit good arguments," Journal of Public Economics, Elsevier, vol. 35(3), pages 371-383, April.
- 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.
- Sandmo, Agnar, 1983. "Ex Post Welfare Economics and the Theory of Merit Goods," Economica, London School of Economics and Political Science, vol. 50(197), pages 19-33, February.
- Mirrless, J. A., 1975. "Optimal commodity taxation in a two-class economy," Journal of Public Economics, Elsevier, vol. 4(1), pages 27-33, February. Full references (including those not matched with items on IDEAS)