A New Approach to Optimal Commodity Taxation

Stefan Homburg

FinanzArchiv: Public Finance Analysis, 2006, vol. 62, issue 3, 323-338

Abstract: This paper makes a fresh attempt at characterizing optimal commodity taxes. Under the usual assumptions, an extremely simple expression for second-best commodity taxes is derived, showing tax rates as functions of observable variables only, rather than as functions of unobservable variables such as compensated cross-elasticities. The main formula is independent of special preferences and of the number of commodities. It has a simple economic meaning and could be particularly useful for empirical research. Examples and remarks on the normalization problem are provided.

Keywords: optimal commodity taxation; Ramsey rule (search for similar items in EconPapers)
JEL-codes: H21 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (4)

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Working Paper: A New Approach to Optimal Commodity Taxation (2004)
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DOI: 10.1628/001522106X153392

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