This chapter analyzes the distortions created by taxation and the features of tax systems that minimize such distortions (subject to achieving other government objectives). It starts with a review of the theory and practice of deadweight loss measurement, followed by characterizations of optimal...

The theory of excess burden and optimal commodity taxation is one of the oldest subjects of study in public finance, dating back to Dupuit (1844), and yet is also closely associated with the rapid analytical development of the field which commenced in the early 1970s. This chapter presents the...