Optimal Mixed Taxation, Credit Constraints and the Timing of Income Tax Reporting

Robin Boadway, Jean-Denis Garon and Louis Perrault

No 6891, CESifo Working Paper Series from CESifo

Abstract: We study optimal income and commodity tax policy with credit-constrained low-income households. Workers are assumed to receive an even ow of income during the tax year, but make tax payments or receive transfers at the end of the year. They use their disposable income to purchase multiple commodities over the year. We show that differentiated subsidies on commodities can be optimal even if the Atkinson-Stiglitz Theorem conditions apply. When the optimal policy leaves low-income households with binding credit constraints, it is optimal to subsidize the good that is consumed in higher proportion by them. We show that this involves subsidizing more goods that fulfill basic needs, such as food or dwelling. The benefits of such subsidies have to be balanced with the costs of financing them, since unconstrained households also benefit from the rebate early in the fiscal year.

Keywords: commodity taxation; optimal taxation; credit constraints (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-agr, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp6891.pdf (application/pdf)

Related works:
Journal Article: Optimal mixed taxation, credit constraints, and the timing of income tax reporting (2019)
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:ces:ceswps:_6891

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().