This Handbook entry presents a conceptual, normative overview of the subject of taxation. It emphasizes the … relationships among the main functions of taxation—notably, raising revenue, redistributing income, and correcting externalities …—and the mapping between these functions and various forms of taxation. Different types of taxation as well as expenditures on …

-seeking preferences justify heavier taxation of income because this serves to internalise the negative externality that the pursuit of … function in such a model, and discuss potential implications for optimal income taxation. …