0000003229 00000 n to the labourer. The literature on optimal taxation typically treats the social planner as a utilitarian: that An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. The Ability-to-Pay Theory of Taxation. A. MIRRLEES Nufield College, Oxford 1. Two valuable books containing extensive accounts of optimal tax theory have appeared, Atkinson and Stiglitz (1980), and Tresch (1981). This chapter discusses and unifies some uncoordinated parts of the theory of optimal taxation. Es says on the Theory of Optimal Taxation : An Overview Introduction Taxation is always a topical research topic, not least because of its policy relevance. 0000032360 00000 n DOI:10.1093/acprof:oso/9780198295211.003.0011, 1 Information and Incentives: The Economics of Carrots and Sticks, 2 Notes on Welfare Economics, Information, and Uncertainty, 3 The Desirability of Natural Resource Depletion, 5 Welfare Economics and Economies of Scale, 6 An Exploration in the Theory of Optimum Income Taxation, 9 Population Policy and the Taxation of Family Size, 15 Optimal Taxation and Government Finance, 16 The Optimal Structure of Incent ives and Authority within an Organization, 17 The Theory of Moral Hazard and Unobservable Behaviour: Part I, 21 Optimum Saving with Economies of Scale, 22 A Pure Theory of Underdeveloped Economies, 23 Project Appraisal and Planning Twenty Years On, 1 Information and Incentives: The Economics of Carrots and Sticks, 2 Notes on Welfare Economics, Information, and Uncertainty, 3 The Desirability of Natural Resource Depletion, 5 Welfare Economics and Economies of Scale, 6 An Exploration in the Theory of Optimum Income Taxation, 9 Population Policy and the Taxation of Family Size, 15 Optimal Taxation and Government Finance, 16 The Optimal Structure of Incent ives and Authority within an Organization, 17 The Theory of Moral Hazard and Unobservable Behaviour: Part I, 21 Optimum Saving with Economies of Scale, 22 A Pure Theory of Underdeveloped Economies, 23 Project Appraisal and Planning Twenty Years On. The main theories or principles in brief, are: (i) Benefit Theory: According to this theory, the state should levy taxes on individuals according to the benefit conferred on them. Oxford Scholarship Online requires a subscription or purchase to access the full text of books within the service. July 2007; International Tax and Public Finance 14(4):383-406; DOI: 10.1007/s10797-007-9024-1. 0000002121 00000 n 80 F.E. This chapter discusses and unifies some uncoordinated parts of the theory of optimal taxation. Optimal Taxation in Theory and Practice N. Gregory Mankiw, Matthew Weinzierl, and Danny Yagan T he optimal design of a tax system is a topic that has long fascinated economic theorists and flummoxed economic policymakers. Budgetary deficits. 175-208. 0000005868 00000 n The Theory of Optimal Taxation: What is the Policy Relevance? 0000006327 00000 n The optimal design of a tax system is a topic that has long fascinated economic theorists and flummoxed economic policymakers. This chapter discusses and unifies some uncoordinated parts of the theory of optimal taxation. It includes a discussion on the development of methods of analysis that can be quickly and easily applied to all kinds of optimal tax problems. Any market good which requires little household time, or even saves time, should carry a relatively low tax rate. 1. Dept. The most important source of government revenue is tax. Most errors are, hopefully, just typos. 0000002476 00000 n 0000034836 00000 n Es says on the Theory of Optimal Taxation : An Overview Introduction Taxation is always a topical research topic, not least because of its policy relevance. Actuarial Science Courses Columbia University School. 198 20 The literature on optimal taxation typically treats the social planner as a utilitarian: that is, the social welfare function is … E. Saez, Using Elasticities to Derive Optimal Income Tax Rates, in Review of Economic Studies, Volume 68, 2001, pp. remain, recent adv ances in optimal tax theory suggest that the information needed to. Optimal Income Taxation Theory and Principles of Fairness by Marc Fleurbaey and François Maniquet. H20,H21 ABSTRACT This paper develops a theory of optimal capital taxation that expresses optimal tax formulas in sufficient statistics. 24: The Theory of Optimal Taxation 1247 Section 2 The material presented here has not previously appeared in print. As recommended by theory, top marginal income tax rates have declined, marginal income tax schedules have flattened, redistribution has risen with income inequality, and commodity taxes are more uniform and are typically assessed on final goods. An earlier and longer draft was circulated as “A Theory of Optimal Capital Taxation,” NBER Working Paper 17989, April 2012. . The paper discusses the implications of optimal tax theory for the debates on uniform commodity taxation and neutral capital income taxation. The ability-to-pay theory is one of the main theories of taxation. %%EOF To make the exposition more concrete, throughout Sections 2, 3, and 4, we discuss the results of quantitative studies based on empirical data and realistic parameter values. Theories of taxation: Optimal taxes and tax reforms, incidence of taxation; Theories of public expenditure: objectives and effects of public expenditure, public expenditure policy and social cost benefit analysis, criteria of public investment decisions social rate of discount, shadow prices of investment, unskilled labour and foreign exchange. Read with caution. ual tax rate of \only" 22% Absent behavioral responses, increasing fed indiv tax rate on top 1% from 22% to 43% would raise revenue by 3 pts of GDP [$450bn/year])Core optimal income tax problem: Top 1% has large po-tential tax capacity but increasing top 1% marginal tax rate might reduce top incomes through behavioral responses 3 They are: (a) The decision as to the aggregate volume of taxation and its composition between direct and indirect taxation. trailer %PDF-1.4 %���� The ability-to-pay theory is one of the main theories of taxation. Mirrlees An Exploration in the Theory of Optimum Income Taxation, in Review of Economic Studies, n. 38, 1971, pp. In his theory, he explained the way in which nature controlled the population and neglected the role of technology and medical advancement to control the population. This work suggests that the under-taxation of housing for owner occupation distorts investment so that owner occupiers are encouraged to over-invest in housing. Downloadable! Ch. I. Static Optimal Taxation How should government set taxes? Paris School of Economics, 48 Boulevard Jourdan, 75014 Paris, France; piketty@pse.ens.fr. METHODOLOGY PRINCIPLES Tax theory can be used for policy if three conditions are met: 1) Relevance: Theory based on economic mechanisms em- pirically relevant and rst order 2) Robustness: Theory reasonably robust to changes in mod-eling assumptions 3) Implementation: Policy prescription is implementable (so-cially … 0000000696 00000 n 0000006999 00000 n Theories of public expenditure: objectives and effects of public expenditure, public expenditure policy and social cost benefit analysis, criteria of public investment decisions, social rate of discount, shadow prices of investment, unskilled labour and foreign exchange. theory of optimal tax systems has the promise of addressing some of the fundamental issues of tax policy in a more satisfactory way than the theory of optimal taxation. Please, subscribe or login to access full text content. contact us Budgetary deficits. A Theory of Optimal Inheritance Taxation Thomas Piketty, Paris School of Economics Emmanuel Saez, UC Berkeley and NBER November 19, 2012 Abstract This paper derives optimal inheritance tax formulas that (a) capture the key equity-e ciency trade-o , (b) are expressed in … We focus on an important class of Equity in Taxation Principles of Equity in Taxation. A carbon emissions tax or a tax on plastic bags are examples of Pigovian taxes. he theory of optimal income taxation has reached maturity and excellent reviews of the field are available (Boadway 2012, Mankiw, Weinzierl, and Yagan 2009, Piketty and Saez 2013b, Salanié 2011). FAQs The theory of taxation is based upon the; ➢ THE PRINCIPLE OF THE RECIPROCITY It is the two-way relation which is the relationship based on the give and the take. The GST design was based on sound economic principles derived from the theory of optimal taxation. Second-Best Tax Theory. Optimal Income Taxation Theory and Principles of Fairness by Marc Fleurbaey and François Maniquet. 0000002338 00000 n A Simpler Theory of Optimal Capital Taxation Emmanuel Saez and Stefanie Stantcheva NBER Working Paper No. H20,H21 ABSTRACT This paper develops a theory of optimal capital taxation that expresses optimal tax formulas in sufficient statistics. Section 3 discusses the optimal non-linear income tax. Public users can however freely search the site and view the abstracts and keywords for each book and chapter. You could not be signed in, please check and try again. The idea of developing a theory of optimal rent taxation is based on the existing approaches in the literature concerning other tax bases. The theory of optimal taxation analyzes how (linear) taxes should be set in order to minimize the cost of distortionary taxation if lump sum taxes are not available and a M. Barbie Department of Economics, University of Karlsruhe, Kollegium IV am Schloss, 76128 Karlsruhe, Germany e-mail: barbie@wior.uni-karlsruhe.de C. Hermeling (O) Centre for European Economic Research (ZEW), P.O. We use a … The analysis does not include minor points of rigour, and a number of important details are treated in depth. underlying optimal-tax theory. The central element of the theory of optimal taxation is information. 0000003193 00000 n Keywords:   0000006573 00000 n 5 tions in the Ramsay tradition that suggested uniform commodity tax rates in a many-person setting are Deaton, (1979a) and Deaton and Stern (1986), for linear Engel curves and linear income tax. Thomas Piketty. Key words: Optimal taxes, public finance, optimal minimum wage, asymmetric information Introduction Mirrlees (1986), elaborates that a good way of governing is to agree upon objectives, than to discover what is possible and to optimize. 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