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Revenue-Maximising Tax Rates in Personal Income Taxation in the Presence of Consumption Taxes: A note

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  • Sanz-Sanz, José Félix

Abstract

This note computes revenue-maximising tax rates in personal income taxes in the presence of consumption taxes. It finds that the traditional Laffer analysis, which neglects the effects of marginal tax rates on consumption, overestimates the magnitude of revenue-maximising tax rates. The bias caused by this oversight is computed.

Suggested Citation

  • Sanz-Sanz, José Félix, 2015. "Revenue-Maximising Tax Rates in Personal Income Taxation in the Presence of Consumption Taxes: A note," Working Paper Series 19275, Victoria University of Wellington, Chair in Public Finance.
    • Handle: RePEc:vuw:vuwcpf:19275
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    File URL: https://ir.wgtn.ac.nz/handle/123456789/19275
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    References listed on IDEAS

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    1. Emmanuel Saez & Joel Slemrod & Seth H. Giertz, 2012. "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 3-50, March.
    2. John Creedy & Norman Gemmell, 2006. "Modelling Tax Revenue Growth," Books, Edward Elgar Publishing, number 4073.
    3. Simon Carey & John Creedy & Norman Gemmell & Josh Teng, 2015. "Estimating the Elasticity of Taxable Income in New Zealand," The Economic Record, The Economic Society of Australia, vol. 91(292), pages 54-78, March.
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