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Optimal Taxes with Untaxed Goods and Factors

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  • Robin W. Boadway

    (Queen's University, Ontario)

Abstract

This paper derives optimal tax rules for an economy which supplies public goods and has several untaxed goods and/or factors The result is a generalization of the Corlett and Hague theorem for which only one untaxed good existed. When some goods or factors are untaxed, the tax rates of the remaining goods and factors must be increased more for those which are most complementary for the goods or factors one would like to tax most, but cannot. Also, the opportunity cost of supplying public goods is decreased if the public goods are complementary with untaxed goods or factors.

Suggested Citation

  • Robin W. Boadway, 1975. "Optimal Taxes with Untaxed Goods and Factors," Public Finance Review, , vol. 3(3), pages 275-290, July.
    • Handle: RePEc:sae:pubfin:v:3:y:1975:i:3:p:275-290
    DOI: 10.1177/109114217500300304
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. Otto A. Davis & Andrew B. Whinston, 1965. "Welfare Economics and the Theory of Second Best," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(1), pages 1-14.
    4. Arnold Harberger, 1964. "Taxation, Resource Allocation, and Welfare," NBER Chapters, in: The Role of Direct and Indirect Taxes in the Federal Reserve System, pages 25-80, National Bureau of Economic Research, Inc.
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