On the Equivalence between Labor and Consumption Taxation

19 Pages Posted: 25 Mar 2009

See all articles by Paolo M. Panteghini

Paolo M. Panteghini

Department of Economics and Management; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: March 2009

Abstract

This article studies the equivalence between labor and consumption taxes in a stochastic context, where the government can undertake an active portfolio management strategy by investing in both risk-free and risky assets. Using a two-period model we show that such taxes let consumers make the same decisions, and can finance the same amount of government spending in each period.

Keywords: consumption and labor taxation, equivalence, risk

JEL Classification: H24

Suggested Citation

Panteghini, Paolo M., On the Equivalence between Labor and Consumption Taxation (March 2009). CESifo Working Paper Series No. 2593, Available at SSRN: https://ssrn.com/abstract=1368132

Paolo M. Panteghini (Contact Author)

Department of Economics and Management ( email )

Contrada Santa Chiara 50
BRESCIA, BS 25122
Italy

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

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