On Policy Relevance of Ramsey Tax Rules

Sheikh Selim ()

No 2007-31, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: The Ramsey approach to optimal taxation and Ramsey tax rules have amassed substance in economic theory. However, they are often criticized on grounds of practicality, fairness, feasibility and some other aspects of designing actual tax policy. This paper presents a collection of these views; it discusses how closely or remotely Ramsey rules are followed in designing tax policy. It presents some recent tax reforms in the US and in the UK that have closely, if not completely, followed the principle of distortion minimization. Despite the widely speculated difficulty associated with mapping normative tax rules into positive policy design, it is possible to implement taxes that have strong correspondence to Ramsey tax formulas. This paper also discusses why some implemented tax rules lack consistency with Ramsey principles, or why it is often difficult to establish correspondence between some implemented taxes and Ramsey tax rules.

Keywords: Optimal Taxation; Policy Relevance; Ramsey Tax Rules (search for similar items in EconPapers)
JEL-codes: E61 E62 H21 H30 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-acc, nep-cba, nep-cdm, nep-mac and nep-pbe
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https://www.econstor.eu/bitstream/10419/17954/1/dp2007-31.pdf (application/pdf)

Related works:
Working Paper: On Policy Relevance of Ramsey Tax Rules (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:5736

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