Uncertainty and Optimally Uniform Commodity Taxes

Helmuth Cremer and Firouz Gahvari

Southern Economic Journal, 1999, vol. 66, issue 1, 156-167

Abstract: This paper examines the implications of uncertainty for the structure of optimal commodity taxes in the presence of a linear income tax. Consumers face uncertain income and commit to consumption of some goods before the resolution of uncertainty and to others after. Preferences are separable between labor and consumption goods. We prove that optimal commodity taxes are (i) uniform within the category of noncommitted goods if their subutility is logarithmic; (ii) uniform within the two categories if both subutilities are logarithmic; and (iii) nonzero across categories, with the tax rate on precommitted goods being lower than the tax rate on noncommitted goods.

Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/j.2325-8012.1999.tb00230.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:soecon:v:66:y:1999:i:1:p:156-167

Access Statistics for this article

More articles in Southern Economic Journal from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().