IDEAS home Printed from https://ideas.repec.org/a/kap/itaxpf/v14y2007i4p383-406.html
   My bibliography  Save this article

The theory of optimal taxation: what is the policy relevance?

Author

Listed:
  • Peter Sørensen

Abstract

The paper discusses the implications of optimal tax theory for the debates on uniform commodity taxation and neutral capital income taxation. While strong administrative and political economy arguments in favor of uniform and neutral taxation remain, recent advances in optimal tax theory suggest that the information needed to implement the differentiated taxation prescribed by optimal tax theory may be easier to obtain than previously believed. The paper also points to the strong similarity between optimal commodity tax rules and the rules for optimal source-based capital income taxation. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Peter Sørensen, 2007. "The theory of optimal taxation: what is the policy relevance?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(4), pages 383-406, August.
    • Handle: RePEc:kap:itaxpf:v:14:y:2007:i:4:p:383-406
    DOI: 10.1007/s10797-007-9024-1
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10797-007-9024-1
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10797-007-9024-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. W. J. Corlett & D. C. Hague, 1953. "Complementarity and the Excess Burden of Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 21(1), pages 21-30.
    2. Saez, Emmanuel, 2004. "Direct or indirect tax instruments for redistribution: short-run versus long-run," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 503-518, March.
    3. Bovenberg, A Lans & Goulder, Lawrence H, 1996. "Optimal Environmental Taxation in the Presence of Other Taxes: General-Equilibrium Analyses," American Economic Review, American Economic Association, vol. 86(4), pages 985-1000, September.
    4. John Piggott & John Whalley, 2001. "VAT Base Broadening, Self Supply, and the Informal Sector," American Economic Review, American Economic Association, vol. 91(4), pages 1084-1094, September.
    5. Sandmo, Agnar, 1974. "A Note on the Structure of Optimal Taxation," American Economic Review, American Economic Association, vol. 64(4), pages 701-706, September.
    6. Naito, Hisahiro, 1999. "Re-examination of uniform commodity taxes under a non-linear income tax system and its implication for production efficiency," Journal of Public Economics, Elsevier, vol. 71(2), pages 165-188, February.
    7. Boadway, Robin & Gahvari, Firouz, 2006. "Optimal taxation with consumption time as a leisure or labor substitute," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1851-1878, November.
    8. Sadka, Efraim, 1977. "A theorem on uniform taxation," Journal of Public Economics, Elsevier, vol. 7(3), pages 387-391, June.
    9. Bovenberg, A.L. & Goulder, L.H., 1996. "Optimal environmental taxation in the presence of other taxes : General equilibrium analyses," Other publications TiSEM 5d4b7517-c5c8-4ef6-ab76-3, Tilburg University, School of Economics and Management.
    10. Sandmo, Agnar, 2000. "The Public Economics of the Environment," OUP Catalogue, Oxford University Press, number 9780198297987.
    11. Judd, Kenneth L., 1985. "Redistributive taxation in a simple perfect foresight model," Journal of Public Economics, Elsevier, vol. 28(1), pages 59-83, October.
    12. Auerbach, Alan J. & Hines, James Jr., 2002. "Taxation and economic efficiency," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 21, pages 1347-1421, Elsevier.
    13. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-622, May.
    14. Auerbach, Alan J., 1989. "The deadweight loss from `non-neutral' capital income taxation," Journal of Public Economics, Elsevier, vol. 40(1), pages 1-36, October.
    15. Osmundsen, P. & Hagen, K. P. & Schjelderup, G., 1998. "Internationally mobile firms and tax policy1," Journal of International Economics, Elsevier, vol. 45(1), pages 97-113, June.
    16. Sandmo, Agnar, 1976. "Optimal taxation : An introduction to the literature," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 37-54.
    17. Atkinson, A. B. & Stiglitz, J. E., 1972. "The structure of indirect taxation and economic efficiency," Journal of Public Economics, Elsevier, vol. 1(1), pages 97-119, April.
    18. Kleven, Henrik Jacobsen, 2004. "Optimum taxation and the allocation of time," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 545-557, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Katri Kosonen & Gaëtan Nicodème, 2009. "The role of fiscal instruments in environmental policy," Working Papers CEB 09-026.RS, ULB -- Universite Libre de Bruxelles.
    2. Salmai Qari & Kai Konrad & Benny Geys, 2012. "Patriotism, taxation and international mobility," Public Choice, Springer, vol. 151(3), pages 695-717, June.
    3. Spencer Bastani & Daniel Waldenström, 2020. "How Should Capital Be Taxed?," Journal of Economic Surveys, Wiley Blackwell, vol. 34(4), pages 812-846, September.
    4. Pereira, Alfredo Marvão & Pereira, Rui Manuel, 2018. "A lower vat rate on electricity in Portugal: Towards a cleaner environment, better economic performance, and less inequality," Energy Policy, Elsevier, vol. 117(C), pages 1-13.
    5. Ruud de Mooij, 2007. "Reinventing the Dutch tax-benefit system; exploring the frontier of the equity-efficiency trade-off," CPB Discussion Paper 88, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Ruud Mooij, 2008. "Reinventing the Dutch tax-benefit system: exploring the frontier of the equity-efficiency trade-off," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(1), pages 87-103, February.
    7. Claudio Agostini & Pablo Correa & Carla Maldonado & Max Spiess, 2021. "Hoja en blanco: hacia una nueva institucionalidad y régimen tributario para Chile," Estudios Públicos, Centro de Estudios Públicos, vol. 0(161), pages 153-186.
    8. Claudio Agostini, 2013. "Una Reforma Eficiente y Equitativa del Impuesto al Ingreso en Chile," Working Papers wp_028, Adolfo Ibáñez University, School of Government.
    9. Copenhagen Economics, 2008. "Study on reduced VAT applied to goods and services in the Member States of the European Union," Taxation Papers 13, Directorate General Taxation and Customs Union, European Commission, revised Oct 2008.
    10. Ce Shang & Anh Ngo & Frank J. Chaloupka, 2020. "The pass-through of alcohol excise taxes to prices in OECD countries," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(6), pages 855-867, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Peter Birch Sørensen, 2006. "The Theory of Optimal Taxation: What is the Policy Relevance?," EPRU Working Paper Series 06-07, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    2. Stiglitz, Joseph E., 2018. "Pareto efficient taxation and expenditures: Pre- and re-distribution," Journal of Public Economics, Elsevier, vol. 162(C), pages 101-119.
    3. Borger, Bruno De, 2011. "Optimal congestion taxes in a time allocation model," Transportation Research Part B: Methodological, Elsevier, vol. 45(1), pages 79-95, January.
    4. Joseph E. Stiglitz, 2015. "In Praise of Frank Ramsey's Contribution to the Theory of Taxation," Economic Journal, Royal Economic Society, vol. 0(583), pages 235-268, March.
    5. European Commission, 2011. "Tax Reforms in EU Member States 2011: tax policy challenges for economic growth and fiscal sustainability," Taxation Papers 28, Directorate General Taxation and Customs Union, European Commission.
    6. Cassou, Steven P. & Gorostiaga Alonso, Miren Arantzazu & Gutiérrez Huerta, María José & Hamilton, Stephen F., 2006. "Second-best tax policy in a growing economy with externalities," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    7. Lemelin, André & Savard, Luc, 2022. "What do CGE models have to say about fiscal reform?," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 758-774.
    8. C. Benassi & E. Randon, 2015. "Optimal Commodity Taxation and Income Distribution," Working Papers wp1001, Dipartimento Scienze Economiche, Universita' di Bologna.
    9. Doris Prammer, 2011. "Quality of taxation and the crisis: Tax shifts from a growth perspective," Taxation Papers 29, Directorate General Taxation and Customs Union, European Commission.
    10. Julien Daubanes & Pierre Lasserre, 2011. "Optimum Commodity Taxation with a Non-Renewable Resource," CIRANO Working Papers 2011s-05, CIRANO.
    11. Jacobs, Bas & Schindler, Dirk, 2012. "On the desirability of taxing capital income in optimal social insurance," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 853-868.
    12. Cristian F. Sepulveda, 2019. "Time-saving Goods, Time Inequalities, and Optimal Taxation," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1902, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    13. Homburg, Stefan, 2010. "Allgemeine Steuerlehre: Kapitel 1. Grundbegriffe der Steuerlehre," EconStor Books, ZBW - Leibniz Information Centre for Economics, number 92547, September.
    14. Spencer Bastani & Daniel Waldenström, 2020. "How Should Capital Be Taxed?," Journal of Economic Surveys, Wiley Blackwell, vol. 34(4), pages 812-846, September.
    15. Kalsbach, Oliver & Rausch, Sebastian, 2024. "Pricing carbon in a multi-sector economy with social discounting," Journal of Environmental Economics and Management, Elsevier, vol. 125(C).
    16. Alex Schmitt, 2018. "Optimal Carbon Pricing and Income Taxation Without Commitment," ifo Working Paper Series 274, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    17. Louis Kaplow, 2022. "Optimal Income Taxation," NBER Working Papers 30199, National Bureau of Economic Research, Inc.
    18. Bovenberg, A. Lans & Goulder, Lawrence H., 2002. "Environmental taxation and regulation," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 23, pages 1471-1545, Elsevier.
    19. Olovsson, Conny, 2015. "Optimal taxation with home production," Journal of Monetary Economics, Elsevier, vol. 70(C), pages 39-50.

    More about this item

    Keywords

    Optimal taxation; Uniform taxation; Tax neutrality; H21; H25;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:itaxpf:v:14:y:2007:i:4:p:383-406. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.