Optimal income taxation without commitment: policy implications of durable goods

Shigeo Morita ()
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Shigeo Morita: Graduate School of Economics, Osaka University

No 14-32, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper examines the design of a tax policy applied to the consumption of durable goods and labor income. We consider cases wherein the government cannot commit to a tax policy in the second period. If the type of taxpayers is unrevealed, it is optimal to tax the durable goods consumption of a high-income earner and subsidize that of a low-income earner. On the other hand, when the type of taxpayers is revealed, imposing a positive tax rate on a high-income earner fs durable goods consumption is desirable. This implies that the government should design taxes on durable goods consumption to be progressive and supplement its optimal tax policies.

Keywords: Commitment; Optimal Taxation; Time consistency (search for similar items in EconPapers)
JEL-codes: D82 H21 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2014-10
New Economics Papers: this item is included in nep-pbe and nep-pub
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