The Optimal Mix of Taxes on Money, Consumption and Income
34 Pages Posted: 27 Feb 2003
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The Optimal Mix of Taxes on Money, Consumption and Income
The Optimal Mix of Taxes on Money, Consumption and Income
Date Written: June 2002
Abstract
In this paper we determine the optimal combination of taxes on money, consumption and income in transactions technology models. We show that the optimal policy does not tax money, regardless of whether the government can use the income tax, the consumption tax, or the two taxes jointly. These results are at odds with recent literature. We argue that the reason for this divergence is an inappropriate specification of the transactions technology adopted in the literature.
Keywords: Friedman rule, inflation tax, transactions technology
JEL Classification: E31, E41, E58, E62
Suggested Citation: Suggested Citation
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