1. Theoretical basis Studying the relation between the tax pressure and tax incomes, A. Laffer together with V.A. Canto and D.H. Joines (1978) in their paper " Taxation, GNP and Potential GNP " , reached the conclusion that the growth of the tax pressure does not necessarily determine the adequate accumulation of tax incomes, in exchange, the diminution of the tax pressure generates favorable c...

The paper presents the fiscal theory of the price level in a variety of models, including endowment economies with lump-sum taxes and production economies with proportional income taxes. We offer a microeconomic perspective on the fiscal theory by computing a Slutsky-Hicks decomposition of the effects of tax changes into substitution, wealth, and revaluation effects. Revaluation effects arise w...