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Revenue-Maximising Tax Rates in Personal Income Taxation in the Presence of Consumption Taxes: A note

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  • Sanz-Sanz, José Félix

Abstract

This note computes revenue-maximising tax rates in personal income taxes in the presence of consumption taxes. It finds that the traditional Laffer analysis, which neglects the effects of marginal tax rates on consumption, overestimates the magnitude of revenue-maximising tax rates. The bias caused by this oversight is computed.

Suggested Citation

  • Sanz-Sanz, José Félix, 2015. "Revenue-Maximising Tax Rates in Personal Income Taxation in the Presence of Consumption Taxes: A note," Working Paper Series 4272, Victoria University of Wellington, Chair in Public Finance.
  • Handle: RePEc:vuw:vuwcpf:4272
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    File URL: http://researcharchive.vuw.ac.nz/handle/10063/4272
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    1. John Creedy & Norman Gemmell, 2006. "Modelling Tax Revenue Growth," Books, Edward Elgar Publishing, number 4073, November.
    2. John Creedy, 2011. "Tax and Transfer Tensions," Books, Edward Elgar Publishing, number 14603, November.
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    1. repec:taf:applec:v:48:y:2016:i:42:p:4042-4050 is not listed on IDEAS

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    Keywords

    Marginal tax rates; Laffer curve; Consumption taxes; Tax revenue; Tax behaviour;

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