Optimal Taxation

The New Palgrave Dictionary of Economics, 2nd Edition, Forthcoming

Harvard Law and Economics Discussion Paper No. 607

14 Pages Posted: 25 Feb 2008 Last revised: 17 Mar 2008

See all articles by Louis Kaplow

Louis Kaplow

Harvard Law School; National Bureau of Economic Research (NBER)

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Abstract

Optimal taxation concerns how various forms of taxation should be designed to maximize social welfare. The task requires an integrated consideration of the revenue-raising and distributive objectives of taxation. The central instrument in developed economies is the labor income tax, the analysis of which was pioneered by Mirrlees (1971). Subsequently, Atkinson and Stiglitz (1976) showed how commodity taxes should be set in the presence of an optimal income tax, the results differing qualitatively from, and in important respects displacing, the teachings derived from Ramsey's (1927) seminal analysis of the pure commodity tax problem.

JEL Classification: H20, H21, H23, H24

Suggested Citation

Kaplow, Louis, Optimal Taxation. The New Palgrave Dictionary of Economics, 2nd Edition, Forthcoming; Harvard Law and Economics Discussion Paper No. 607. Available at SSRN: https://ssrn.com/abstract=1095899

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