How Should Commodities Be Taxed? A Counterargument to the Recommendation in the Mirrlees Review
Spencer Bastani (),
Sören Blomquist and
Jukka Pirttilä ()
No 2013:5, Working Paper Series, Center for Fiscal Studies from Uppsala University, Department of Economics
The Mirrlees Review recommends that commodity taxation should in general be uniform, but with some goods consumed in conjunction with labour supply (such as child care) left untaxed. This paper examines the validity of this claim in an optimal income tax framework. Contrary to the recommendation of the Review, our theoretical results imply that even if all goods other than the good needed for working are separable from leisure, the optimal tax on these goods should not be uniform. Instead, goods with larger expenditure elasticities should be discouraged relatively more by the tax system. If the government fully subsidises the cost of the good needed for working, then commodity taxation is uniform under the standard separability assumption. Our results imply that the optimal commodity tax system is dependent on the expenditure side of the government. A calibration exercise presented in the paper suggests that these results can be quantitatively important.
Keywords: income taxation; commodity taxation; public provision; separability (search for similar items in EconPapers)
JEL-codes: H21 H42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 404 Not Found
Journal Article: How should commodities be taxed? A counter-argument to the recommendation in the Mirrlees Review (2015)
Working Paper: How Should Commodities be Taxed? A Counterargument to the Recommendation in the Mirrlees Review (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hhs:uufswp:2013_005
Access Statistics for this paper
More papers in Working Paper Series, Center for Fiscal Studies from Uppsala University, Department of Economics Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Katarina Grönvall (). This e-mail address is bad, please contact .