A Theory of the Politically Optimal Commodity Tax

Carlos Seiglie

Economic Inquiry, 1990, vol. 28, issue 3, 586-603

Abstract: A theory of the politically optimal tax is developed where tax rates are endogenous and determined by forces in the political market. The theory is used to explain the levels of alcoholic beverage taxes between states in the United States. It is shown that these rates are influenced by the ownership structure existing in the liquor industry, the consumption externalities associated with drinking, the minimum drinking age laws, the earmarking of tax revenues, the enforcement of regulations, and real income. Copyright 1990 by Oxford University Press.

Date: 1990
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