Optimal Libertarian Sin Taxes
This paper studies the optimal fiscal treatment of addictive goods (cigarettes, drugs, fatty foods, alcohol, gambling etc.). It shows that, when agents have private information about their productivity levels and their degree of rationality, the Atkinson and Stiglitz result of optimal uniform commodity taxation does not hold: addictive and non-addictive goods should be taxed at different rates. Depending on the direction of redistribution, the addictive good should be taxed more or less than the non-addictive good. Differential commodity taxation is not driven by the planner’s paternalism, but only by incentive considerations. A tax authority which fully respects consumers’ sovereignty taxes the consumption of addictive and non-addictive goods at different rates to improve screening of types and increase income redistribution.
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- Sören Blomquist & Vidar Christiansen, 2008.
"Taxation and Heterogeneous Preferences,"
FinanzArchiv: Public Finance Analysis,
Mohr Siebeck, Tübingen, vol. 64(2), pages 218-244, June.
- Blomquist, Sören & Christiansen, Vidar, 2004. "Taxation and Heterogeneous Preferences," Working Paper Series 2004:9, Uppsala University, Department of Economics.
- Sören Blomquist & Vidar Christiansen, 2004. "Taxation and Heterogeneous Preferences," CESifo Working Paper Series 1244, CESifo Group Munich.
- Richard H. Thaler & Cass R. Sunstein, 2003. "Libertarian Paternalism," American Economic Review, American Economic Association, vol. 93(2), pages 175-179, May.
- Cremer, Helmuth & Gahvari, Firouz, 1995. "Uncertainty and optimal taxation: In defense of commodity taxes," Journal of Public Economics, Elsevier, vol. 56(2), pages 291-310, February.
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