Taxing Leisure Complements
نویسندگان
چکیده
Ever since Corlett and Hague (1953), it has been understood that it tends to be optimal on second-best grounds to (relatively) tax complements to leisure and subsidize substitutes because doing so helps to offset the distorting effect of taxation on labor supply. Yet in the context of simultaneous optimization of a nonlinear income tax and commodity taxes, Atkinson and Stiglitz (1976) claim to have demonstrated the opposite, that goods complementary with leisure should “face lower tax rates, whereas substitutes face higher tax rates.” Derivations in leading texts on optimal taxation seem to yield opposing conclusions regarding the sign of optimal deviation of commodity taxes from uniformity. It is demonstrated that the optimality of relatively taxing leisure complements is indeed correct, and conflicting results are explained. JEL Classes: H21, H24
منابع مشابه
On the Desirability of Taxing Capital Income in Optimal Social Insurance
This paper analyzes optimal linear taxes on labor income and savings in a twoperiod life-cycle model with ex ante identical households, endogenous leisure demands in both periods, and general processes of skill shocks over the life cycle. We demonstrate that the Atkinson-Stiglitz theorem breaks down under risk. Capital taxes are employed besides labor income taxes for two distinct reasons: i) c...
متن کاملAnticipated Inflation in a Neoclassical Growth Model with a Cash-in-advance Constraint
Sufficient conditions for the long run non-superneutrality of money are established in a neoclassical growth model with a labor-leisure choice. Money is held to satisfy a cash-in-advance constraint on consumption purchases. Production requires capital and labor while period utility depends on consumption and leisure. Sufficient conditions for increased money growth to reduce output in the long ...
متن کاملTaxing Childcare: Effects on Family Labor Supply and Children
Taxing Childcare: Effects on Family Labor Supply and Children Previous studies report a wide range of estimates for how female labor supply responds to childcare prices. We shed new light on this question using a reform that raised the prices of public daycare. Parents respond by reducing public daycare and increasing childcare at home. Parents also reduce informal childcare indicating that pub...
متن کاملTime and Money - Substitutes in real terms and complements in satisfactions
Time and money are basic commodities in the utility function and are substitutes in real terms. To a certain extent, having time and money is a matter of either or, depending on individual preferences and budget constraints. At the same time, however, satisfaction with time and satisfaction with money are typically complements; i.e. individuals are equally satisfied with both domains. In this p...
متن کاملOptimal Second Best Taxation of Addictive Goods∗
In this paper we derive conditions under which optimal tax rates for addictive goods exceed tax rates for non-addictive consumption goods in a rational addiction framework where exogenous government spending cannot be financed with lump sum taxes. Standard static models that consider a revenue raising motive predict taxing addictive goods at a rate in excess of that observed in the data. In con...
متن کامل