Income Taxation and Optimal Government Policy

12 Pages Posted: 12 Oct 2005

See all articles by Louis Kaplow

Louis Kaplow

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

Abstract

Various economic literatures address the question whether first-best prescriptions for government policy require modification because redistributive income taxation distorts labor supply and cannot achieve the distributive ideal. Perhaps second-best rules for public goods provision, corrective taxation, public sector pricing, and other government activity should reflect concerns about distribution and labor supply distortion. Recent work demonstrates, however, that in basic cases first-best principles remain applicable. Demonstrations make use of income tax adjustments that preserve not only budget balance but also the pre-reform distribution of utility.

JEL Classification: D61, D62, D63, H21, H23, H24, H41, H43, L51, Q52

Suggested Citation

Kaplow, Louis, Income Taxation and Optimal Government Policy. The New Palgrave Dictionary of Economics and the Law, 2nd Edition, Forthcoming; Harvard Law and Economics Discussion Paper No. 518. Available at SSRN: https://ssrn.com/abstract=825568

Louis Kaplow (Contact Author)

Harvard Law School ( email )

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HOME PAGE: http://www.law.harvard.edu/faculty/directory/facdir.php?id=32&show=bibliography

National Bureau of Economic Research (NBER)

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