The incidence and efficiency losses of taxes have usually been analyzed in isolation from public expenditures. This negligence of the expenditure side may imply a serious misperception of the effects of marginal tax rates. The reason is that part of the marginal tax may in fact be a payment for...

A simple two-period model is set up to carry out a normative analysis of the taxation of interest income and imputed rent from consumer durable goods. It is demonstrated how the optimum structure of this capital income taxation depends on savings and investment elasticities and cross effects...

There is extensive public provision of private goods in all developed countries. The public provision scheme is often designed so that individuals can opt out but not top up (supplement) the publicly provided quantity/quality. Using an optimal income tax/public provision model, the authors...

The paper studies optimal taxation in a two-period, two-asset model in which the assets have random returns. The taxes are state-contingent, proportional taxes on the asset-returns. Government revenue requirements in each state of nature are given. Consumers are identical. Two results are found....

Nonlinear income taxes and linear commodity taxes are analyzed when people differ with respect to ability, high-skill agents have heterogeneous preferences, and neither individual abilities nor preferences are observable. We characterize pure income tax optima, which may be bunching or...

The analysis of the marginal cost of public funds is extended to the simple two-type, income tax model where individual skill is private information. The marginal cost is related to the prevailing distortions and properties of individual preferences. A division of a tax increase is identified...

Using a partial equilibrium model, optimality rules for a commodity tax are derived for an economy that is exposed to cross-border shopping. In a competitive market, the conventional inverse elasticity rule is shown to be valid with the qualification that it is the elasticity of domestic rather...

In this survey of some central issues of tax and expenditure policy in an open economy, the authors consider the implications for policy of free--although not necessarily perfect--international mobility of commodities, capital, and labor. They examine the issues both from a positive and a...