The Case for Uniform Commodity Taxation: A Tax Reform Approach

Robin Boadway and Katherine Cuff

Hacienda Pública Española / Review of Public Economics, 2023, vol. 244, issue 1, 79-109

Abstract: Generalizing the tax reform approach of Laroque (2005), Kaplow (2006) and Hellwig (2009), we show that for any arbitrary income tax system differential commodity taxation can be Pareto-dominated by a uniform rate with a suitably reformed income tax. Under particular preference specifications, we derive the explicit income tax reforms required in an representative-agent economy and when there is linear progressive, piecewise linear and nonlinear income taxation. Optimal uniform commodity results of Sandmo (1974), Atkinson and Stiglitz (1976) and Deaton (1979) apply with involuntary unemployment and when individuals differ in preferences for leisure and make extensive labour supply decisions.

Keywords: Uniform commodity taxation; Optimal income tax; Piecewise linear income tax. (search for similar items in EconPapers)
JEL-codes: H21 H23 H24 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:hpe:journl:y:2023:v:244:i:1:p:79-109

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