The Optimal Mix of Taxes on Money, Consumption and Income

Pedro Teles and Fiorella De Fiore

No 3437, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We determine the optimal combination of taxes on money, consumption and income in transactions technology models where exogenous government expenditures must be financed with distortionary taxes. We show that the optimal policy does not tax money, regardless of whether the government can use as alternative fiscal instruments an income tax, a consumption tax, or the two taxes jointly. These results are at odds with recent literature. We argue that the reason for this divergence is an inappropriate specification of the transactions technology adopted in the literature.

Keywords: Friedman rule; Inflation tax; Transactions technology (search for similar items in EconPapers)
JEL-codes: E31 E41 E58 E62 (search for similar items in EconPapers)
Date: 2002-06
New Economics Papers: this item is included in nep-mac, nep-pol and nep-pub
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: The optimal mix of taxes on money, consumption and income (2003)
Working Paper: The optimal mix of taxes on money, consumption and income (2002)
Working Paper: The optimal mix of taxes on money, consumption and income (2002)
Working Paper: The Optimal Mix Of Taxes on Money, Consumption and Income (1999)
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