Is Commodity Taxation Unfair?

Marc Fleurbaey

No 502, IDEP Working Papers from Institut d'economie publique (IDEP), Marseille, France

Abstract: In a model where agents have unequal skills and heterogeneous preferences about consumption goods and leisure, this paper studies how to combine linear commodity taxes and non-linear income tax. It proposes a particular social welfare function on the basis of fairness principles. It then derives a simple criterion for evaluating the social welfare consequences of various tax schedules. Under the proposed approach, the optimal tax should have no commodity tax for some range of consumptions, and income redistribution would feature high subsidies to the working poor. It is also shown that, even when the income tax fails to be optimal, commodity taxes may not improve social welfare.

Keywords: Optimal Tax; Income Tax; Commodity Tax; Social Choice; Fairness. (search for similar items in EconPapers)
JEL-codes: D63 H21 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2005-01, Revised 2005-01
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Related works:
Journal Article: Is commodity taxation unfair? (2006)
Working Paper: Is commodity taxation unfair? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:iep:wpidep:0502

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