Optimal Commodity Taxation and Income Distribution

Optimal Dual Income Taxation

There is a strong case for arguing that, in contradiction to some traditional arguments in public economics, capital income should be taxed, though not necessarily under the same rate schedule as labour earnings. The Dual Income Taxation (DIT) system consists of two parallel piecewise linear tax schedules, in which that for capital income has a zero lower bracket rate and an upper bracket rate ...

Optimal Capital Income Taxation∗

In an economy with identical infinitely-lived households that obtain utility from leisure as well as consumption, Chamley (1986) and Judd (1985) have shown that the optimal tax system to pay for an exogenous stream of government purchases involves a zero tax rate on capital in the long run, with tax revenue collected by a distortionary tax on labor income. Extending the results of Hall and Jorg...

Optimal Labor Income Taxation∗

This handbook chapter reviews recent developments in the theory of optimal labor income taxation. We emphasize connections between theory and empirical work that were initially lacking from optimal income tax theory. First, we provide historical and international background on labor income taxation and means-tested transfers. Second, we present the simple model of optimal linear taxation. Third...

A New Approach to Optimal Commodity Taxation

This paper makes a fresh attempt at characterizing optimal commodity taxes. Under the usual assumptions, an extremely simple expression of second-best commodity taxes is derived, showing tax rates as functions of observable variables only, rather than as functions of unobservable variables such as compensated cross elasticities. The main formula is independent of special preferences, and indepe...

Optimal commodity taxation for reduction of envy