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A New Approach to Optimal Commodity Taxation

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  • Homburg, Stefan

Abstract

This paper makes a fresh attempt at characterizing optimal commodity taxes. Under the usual assumptions, an extremely simple expression of second-best commodity taxes is derived, showing tax rates as functions of observable variables only, rather than as functions of unobservable variables such as compensated cross elasticities. The main formula is independent of special preferences, and independent of the number of commodities. It has a simple economic meaning and could be particularly useful for empirical research. Examples and remarks on the normalization problem are provided.

Suggested Citation

  • Homburg, Stefan, 2004. "A New Approach to Optimal Commodity Taxation," Hannover Economic Papers (HEP) dp-299, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    • Handle: RePEc:han:dpaper:dp-299
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    References listed on IDEAS

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    1. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695, October.
    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.
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    5. Michael Smart, 2002. "Reforming the Direct–Indirect Tax Mix," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(2), pages 143-155, March.
    6. 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.
    7. 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.
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    Cited by:

    1. Homburg, Stefan, 2010. "Allgemeine Steuerlehre: Kapitel 1. Grundbegriffe der Steuerlehre," EconStor Books, ZBW - Leibniz Information Centre for Economics, number 92547, December.
    2. Yoshitomo Ogawa, 2007. "The optimal commodity tax structure in a four-good model," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(6), pages 657-671, December.
    3. Ulrich van Suntum, "undated". "Income Taxes, Death Taxes, and Optimal Consumption-Leisure-Savings-Choice," Working Papers 200124, Institute of Spatial and Housing Economics, Munster Universitary.
    4. van Suntum, Ulrich, 2008. "Income taxes, death taxes, and optimal consumption-leisure-savings-choice," CAWM Discussion Papers 4, University of Münster, Münster Center for Economic Policy (MEP).

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    More about this item

    Keywords

    Optimal Commodity Taxation; Ramsey Rule;

    JEL classification:

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

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