IDEAS home Printed from https://ideas.repec.org/a/sae/pubfin/v25y1997i5p491-508.html
   My bibliography  Save this article

Political Incentives and Optimal Taxation

Author

Listed:
  • Dwight R. Lee

    (University of Georgia)

  • Arthur Snow

    (University of Georgia)

Abstract

Recent studies have questioned the empirical relevance and normative validity of the traditional prescriptions for optimal taxation based on Ramsey's original in sights. The present authors analyze governments that maximize net political benefits, which only imperfectly represent net social benefits, and conclude that Ramsey's rules always yield empirically relevant predictions once they are modified to account for existing restraints on taxation. Moreover, for a broad spectrum of governments, an unrestricted tax base is socially optimal, and Ramsey's rules apply without modification as valid normative prescriptions. However, restraints on taxation are optimal for governments that create more than a critical level of distortion in evaluating the marginal social costs and benefits of taxation and spending. None theless, Ramsey's rules still provide valid normative prescriptions once the optimal constitutional prescriptions are imposed .

Suggested Citation

  • Dwight R. Lee & Arthur Snow, 1997. "Political Incentives and Optimal Taxation," Public Finance Review, , vol. 25(5), pages 491-508, September.
  • Handle: RePEc:sae:pubfin:v:25:y:1997:i:5:p:491-508
    DOI: 10.1177/109114219702500503
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/109114219702500503
    Download Restriction: no

    File URL: https://libkey.io/10.1177/109114219702500503?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
    ---><---

    References listed on IDEAS

    as
    1. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    2. Auerbach, Alan J., 1985. "The theory of excess burden and optimal taxation," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 2, pages 61-127, Elsevier.
    3. 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.
    4. Hettich, Walter & Winer, Stanley L, 1988. "Economic and Political Foundations of Tax Structure," American Economic Review, American Economic Association, vol. 78(4), pages 701-712, September.
    5. John Douglas Wilson, 1989. "An Optimal Tax Treatment Of Leviathan," Economics and Politics, Wiley Blackwell, vol. 1(2), pages 97-117, July.
    6. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-278, June.
    7. Foster, Edward & Sonnenschein, Hugo, 1970. "Price Distortion and Economic Welfare," Econometrica, Econometric Society, vol. 38(2), pages 281-297, March.
    8. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(3), pages 371-400.
    Full references (including those not matched with items on IDEAS)

    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. A. Lans Bovenberg & Frederick van der Ploeg, 2002. "Environmental Policy, Public Finance and the Labour Market in a Second-Best World," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 6, pages 112-153, Edward Elgar Publishing.
    2. Claudio Agostini, 2004. "Tax Interdependence in American States," Econometric Society 2004 Latin American Meetings 155, Econometric Society.
    3. Homburg, Stefan, 2010. "Allgemeine Steuerlehre: Kapitel 1. Grundbegriffe der Steuerlehre," EconStor Books, ZBW - Leibniz Information Centre for Economics, number 92547.
    4. Sandro Brusco & Luca Colombo & Umberto Galmarini, 2014. "Tax differentiation, lobbying, and welfare," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 42(4), pages 977-1006, April.
    5. Takumi HAIBARA & Hiroshi OHTA, 2011. "A New Proposal of Ecological Tax Reform," GSICS Working Paper Series 24, Graduate School of International Cooperation Studies, Kobe University.
    6. Junichi Minagawa & Thorsten Upmann, 2018. "Optimal taxation under a consumption target," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 50(4), pages 663-676, April.
    7. James Alm, 2018. "Is the Haig‐Simons Standard Dead? The Uneasy Case for a Comprehensive Income Tax," National Tax Journal, National Tax Association;National Tax Journal, vol. 71(2), pages 379-398, June.
    8. Jacobs, Bas & de Mooij, Ruud A., 2015. "Pigou meets Mirrlees: On the irrelevance of tax distortions for the second-best Pigouvian tax," Journal of Environmental Economics and Management, Elsevier, vol. 71(C), pages 90-108.
    9. C. Benassi & E. Randon, 2015. "Optimal Commodity Taxation and Income Distribution," Working Papers wp1001, Dipartimento Scienze Economiche, Universita' di Bologna.
    10. Randall G. Holcombe, 2002. "The Ramsey Rule Reconsidered," Public Finance Review, , vol. 30(6), pages 562-578, November.
    11. Odd E. Nygård & John T. Revesz, 2015. "Optimal indirect taxation and the uniformity debate: A review of theoretical results and empirical contributions," Discussion Papers 809, Statistics Norway, Research Department.
    12. Brita Bye & Karine Nyborg, 1999. "The Welfare Effects of Carbon Policies: Grandfathered Quotas versus Differentiated Taxes," Discussion Papers 261, Statistics Norway, Research Department.
    13. Lawrence H. Goulder, 1994. "Energy Taxes: Traditional Efficiency Effects and Environmental Implications," NBER Chapters, in: Tax Policy and the Economy, Volume 8, pages 105-158, National Bureau of Economic Research, Inc.
    14. Stiglitz, Joseph E., 2018. "Pareto efficient taxation and expenditures: Pre- and re-distribution," Journal of Public Economics, Elsevier, vol. 162(C), pages 101-119.
    15. Spencer Bastani & Sebastian Koehne, 2022. "How Should Consumption Be Taxed?," CESifo Working Paper Series 10038, CESifo.
    16. Bas (B.) Jacobs & Rick (F.) van der Ploeg, 2017. "Should Pollution Taxes Be Targeted At Income Redistribution?," Tinbergen Institute Discussion Papers 17-070/VI, Tinbergen Institute.
    17. Anderson, James E. & Neary, J. Peter, 2016. "Sufficient statistics for tariff reform when revenue matters," Journal of International Economics, Elsevier, vol. 98(C), pages 150-159.
    18. Jacobs, Bas & van der Ploeg, Frederick, 2019. "Redistribution and pollution taxes with non-linear Engel curves," Journal of Environmental Economics and Management, Elsevier, vol. 95(C), pages 198-226.
    19. Masaya Yasuoka & Minoru Hayashida, 2015. "How should a government finance redistribution policies?," Discussion Paper Series 136, School of Economics, Kwansei Gakuin University, revised Oct 2015.
    20. Stern, Nicholas, 1983. "Tax Reform: Income Distribution, Government Revenue And Planning," Discussion Papers 272812, University of Warwick - Department of Economics.

    More about this item

    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:sae:pubfin:v:25:y:1997:i:5:p:491-508. 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: SAGE Publications (email available below). General contact details of provider: .

    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.