Skip to main content
SpringerLink
Log in

Optimal Taxation

  • Living reference work entry
  • Latest version View entry history
  • First Online:
The New Palgrave Dictionary of Economics

  • 651 Accesses

Abstract

Optimal taxation concerns how various forms of taxation should be designed to maximize social welfare. The task requires an integrated consideration of the revenue-raising and distributive objectives of taxation. The central instrument in developed economies is the labour income tax, the analysis of which was pioneered by Mirrlees (Review of Economic Studies 68:175–208, 1971). Subsequently, Atkinson and Stiglitz (Journal of Public Economics 6:55–75, 1976) showed how commodity taxes should be set in the presence of an optimal income tax, the results differing qualitatively from, and in important respects displacing, the teachings derived from Ramsey’s (Economic Journal 37:41–61, 1927) seminal analysis of the pure commodity tax problem.

This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution

Institutional subscriptions

Bibliography

  • Akerlof, G.A. 1978. The economics of ‘tagging’ as applied to the optimal income tax, welfare programs, and manpower planning. American Economic Review 68: 8–19.

    Google Scholar 

  • Atkinson, A.B.., and J.E. Stiglitz. 1976. The design of tax structure: Direct versus indirect taxation. Journal of Public Economics 6: 55–75.

    Article  Google Scholar 

  • Atkinson, A.B.., and J.E. Stiglitz. 1980. Lectures on public economics. New York: McGraw-Hill.

    Google Scholar 

  • Auerbach, A.J., and J.R. Hines. 2002. Taxation and economic efficiency. In Handbook of public economics, ed. A.J. Auerbach and M. Feldstein, vol. 3. Amsterdam: North-Holland.

    Google Scholar 

  • Corlett, W.J., and D.C. Hague. 1953. Complementarity and the excess burden of taxation. Review of Economic Studies 21: 21–30.

    Article  Google Scholar 

  • Dahan, M., and M. Strawczynski. 2000. Optimal income taxation: An example with a U-shaped pattern of optimal marginal tax rates: Comment. American Economic Review 90: 681–686.

    Article  Google Scholar 

  • Diamond, P.A. 1998. Optimal income taxation: An example with a U-shaped pattern of optimal marginal tax rates. American Economic Review 88: 83–95.

    Google Scholar 

  • Kanbur, R., and M. Tuomala. 1994. Inherent inequality and the optimal graduation of marginal tax rates. Scandinavian Journal of Economics 96: 275–282.

    Article  Google Scholar 

  • Kaplow, L. 2004. On the (ir)relevance of distribution and labor supply distortion to government policy. Journal of Economic Perspectives 18 (4): 59–75.

    Article  Google Scholar 

  • Kaplow, L. 2006. On the undesirability of commodity taxation even when income taxation is not optimal. Journal of Public Economics 90: 1235–1250.

    Article  Google Scholar 

  • Kaplow, L. 2008. The theory of taxation and public economics. Princeton: Princeton University Press.

    Google Scholar 

  • Konishi, H. 1995. A Pareto-improving commodity tax reform under a smooth nonlinear income tax. Journal of Public Economics 56: 413–446.

    Article  Google Scholar 

  • Laroque, G. 2005. Indirect taxation is harmful under separability and taste homogeneity: A simple proof. Economics Letters 87: 141–144.

    Article  Google Scholar 

  • Mirrlees, J.A. 1971. An exploration in the theory of optimum income taxation. Review of Economic Studies 68: 175–208.

    Article  Google Scholar 

  • Ramsey, F.P. 1927. A contribution to the theory of taxation. Economic Journal 37: 41–61.

    Google Scholar 

  • Saez, E. 2001. Using elasticities to derive optimal income tax rates. Review of Economic Studies 68: 205–229.

    Article  Google Scholar 

  • Salanié, B. 2003. The economics of taxation. Cambridge, MA: MIT Press.

    Google Scholar 

  • Slemrod, J. 1990. Optimal taxation and optimal tax systems. Journal of Economic Perspectives 4 (1): 157–178.

    Article  Google Scholar 

  • Slemrod, J., S. Yitzhaki, J. Mayshar, and M. Lundholm. 1994. The optimal two- bracket linear income tax. Journal of Public Economics 53: 269–290.

    Article  Google Scholar 

  • Stern, N.H. 1976. On the specification of models of optimum income taxation. Journal of Public Economics 6: 123–162.

    Article  Google Scholar 

  • Stern, N.H. 1982. Optimum taxation with errors in administration. Journal of Public Economics 17: 181–211.

    Article  Google Scholar 

  • Stiglitz, J.E. 1982. Self-selection and Pareto efficient taxation. Journal of Public Economics 17: 213–240.

    Article  Google Scholar 

  • Stiglitz, J.E. 1987. Pareto efficient and optimal taxation and the new new welfare economics. In Handbook of public economics, ed. A.J. Auerbach and M. Feldstein, vol. 2. Amsterdam: North-Holland.

    Google Scholar 

  • Tuomala, M. 1990. Optimal income tax and redistribution. Oxford: Clarendon Press.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. http://link.springer.com/referencework/10.1057/978-1-349-95121-5

    Louis Kaplow

Authors
  1. Louis Kaplow
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

    Copyright information

    © 2008 The Author(s)

    About this entry

    Cite this entry

    Kaplow, L. (2008). Optimal Taxation. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_1574-2

    Download citation

    • DOI: https://doi.org/10.1057/978-1-349-95121-5_1574-2

    • Received:

    • Accepted:

    • Published:

    • Publisher Name: Palgrave Macmillan, London

    • Online ISBN: 978-1-349-95121-5

    • eBook Packages: Springer Reference Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences

    Publish with us

    Policies and ethics

    Chapter history

    1. Latest

      Optimal Taxation
      Published:
      14 March 2017

      DOI: https://doi.org/10.1057/978-1-349-95121-5_1574-2

    2. Original

      Optimal Taxation
      Published:
      16 November 2016

      DOI: https://doi.org/10.1057/978-1-349-95121-5_1574-1

    Search

    Navigation