Income Tax, Commodity Tax and Environmental Policy

Jukka Pirttilä and Matti Tuomala

International Tax and Public Finance, 1997, vol. 4, issue 3, 379-393

Abstract: Using the self-selection approach to tax analysis, thepaper analyses the impact of environmental externalities on Pareto-efficientnon-linear income tax, proportional commodity taxes and publicexpenditure. Consideration of externalities within this frameworkreveals intuitive insights into environmental tax policy, suggestingthat some earlier conclusions drawn in the relevant literaturemight be misleading. The results indicate that, while the externality‘sdirect harmful impact raises marginal tax rates, the influencethrough the self-selection constraint tends to decrease the rise.We also derive conditions under which the Pigovian tax can bedetermined purely on the basis of internalizing the externality. Copyright Kluwer Academic Publishers 1997

Keywords: Pareto-efficient taxation; Public goods; Environmental externalities; Non-linear income taxation (search for similar items in EconPapers)
Date: 1997
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DOI: 10.1023/A:1008624623340

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