Taxation of Producer and Consumer Purchases: What Can CGE Tell Us about the Real World of Sales and Use Taxes?∗

This paper explores, through the use of a sequence of computable general equilibrium models, what harm or good, as measured both in terms of real output and utility, might be accomplished through coordinated perturbations in excise and income tax policy among sovereign jurisdictions. We focus on two issues: the taxation of below-retail transactions and the taxation of E-commerce across state lines for jurisdictions that are comparable in fiscal structure and size, and for circumstances when both fiscal structure and size systematically vary. JEL Classification: H2, H7, C68, F1 ∗This is a revised version of a paper presented at the 2003 Public Economic Theory conference, Duke University. We wish to thank participants for helpful comments. Responsibility for the paper rests with the authors and not with the University of Alabama and/or Carnegie-Mellon University (or their Trustees). †Corresponding Author: Robert P. Strauss, Hamburg Hall, Carnegie-Mellon University, Pittsburgh, PA 15213-3890; phone: 412-268-4798, fax: 412-268-5098.