Income Tax, Commodity Tax and Environmental Policy

INTERNATIONAL TAX AND PUBLIC FINANCE, Vol. 4, No. 3, 1997

Posted: 8 Jul 1997

See all articles by Jukka Pirttila

Jukka Pirttila

United Nations - World Institute for Development Economics Research (UNU/WIDER); Tampere University of Technology

Matti Tuomala

University of Tampere

Abstract

Using the self-selection approach to tax analysis, the paper analyzes the impacts of environmental externalities on Pareto-efficient non-linear income tax, proportional commodity taxes and public expenditure. Consideration of externalities within this framework reveals intuitive insights into environmental tax policy, suggesting that some earlier conclusions drawn in the relevant literature might be misleading. The results indicate that, while the externality's direct harmful impact raises marginal tax rates, the influence through the self-selection constraint tends to decrease the rise. We also derive conditions under which the Pigovian tax can be determined purely on the basis of internalizing the externality.

JEL Classification: H23, H24, H25, Q28, Q38

Suggested Citation

Pirttila, Jukka and Tuomala, Matti, Income Tax, Commodity Tax and Environmental Policy. INTERNATIONAL TAX AND PUBLIC FINANCE, Vol. 4, No. 3, 1997. Available at SSRN: https://ssrn.com/abstract=8722

Jukka Pirttila

United Nations - World Institute for Development Economics Research (UNU/WIDER) ( email )

Katajanokanlaituri 6B
Helsinki, FIN-00160
Finland

Tampere University of Technology ( email )

P.O. 541, Korkeakoulunkatu 8 (Festia building)
Tampere, FI-33101
Finland

Matti Tuomala (Contact Author)

University of Tampere ( email )

P.O. Box 607
Tampere, FIN-33101
Finland
+358-3-2156031 (Phone)
+358-3-2157254 (Fax)

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