Optimal Commodity Taxation and Income Distribution

Benassi, Corrado ; Randon, Emanuela (2015) Optimal Commodity Taxation and Income Distribution. Bologna: Dipartimento di Scienze economiche DSE, p. 36. DOI 10.6092/unibo/amsacta/4227. In: Quaderni - Working Paper DSE (1001). ISSN 2282-6483.
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Abstract

We consider the interplay between income distribution and optimal commodity taxation, linking equity issues to optimal taxes through the effect of income distribution on market demand and its price elasticity. We find conditions to conciliate the equity and efficiency tradeoff and to assess the impact of inequality changes on the optimal taxation of necessity and luxury goods. We show that the regressivity or progressivity of the tax system is determined by the distribution of luxuries and necessities in the economy. If the tax system is regressive (progressive), a decrease (increase) of income inequality leads to an average decrease of the optimal tax rates, achieving welfare gains for society. Our analysis provides a framework to investigate the linkages between direct and indirect taxation.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Benassi, Corrado
Randon, Emanuela
Keywords
Optimal Commodity Taxation, Efficiency, Equity, Income Distribution
Subjects
ISSN
2282-6483
DOI
Deposit date
09 Apr 2015 12:05
Last modified
21 Oct 2015 09:43
URI

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