Can Consumption Taxes Stabilize the Economy in the Presence of Consumption Externalities?

2016 ◽  
pp. 259-278
Author(s):  
Teresa Lloyd-Braga ◽  
Leonor Modesto
Keyword(s):  
Consumption Externalities ◽  
Consumption Taxes

Optimal taxation with externalities of consumption and education spending

2019 ◽  
Author(s):  
Jie Zhang
Keyword(s):  
Optimal Taxation ◽  
School Quality ◽  
Income Taxes ◽  
Consumption Externalities ◽  
Education Spending ◽  
Education Subsidies ◽  
Labour Income ◽  
High Consumption ◽  
Higher Education Subsidies ◽  
Consumption Taxes

Abstract We investigate optimal taxation when a person’s utility decreases in others’ consumption and school quality increases in others’ education spending. Education externalities reduce education spending and schooling time from optimal levels, whereas consumption externalities cause high consumption relative to leisure and public goods. Internalizing education externalities supports education subsidies but opposite taxes on consumption and labour income. Internalizing consumption externalities supports consumption taxes but equal rates of labour income taxes and education subsidies. Internalizing both externalities justifies higher education subsidies than labour income taxes and positive taxes on labour income and consumption. We also investigate quantitative implications for tax reform and government debt sustainability.

Dynamic effects of consumption tax reforms with durable consumption

2020 ◽  
Vol 20 (2) ◽  
Author(s):  
Qian Li
Keyword(s):  
Generation Model ◽  
Consumption Tax ◽  
Income Risk ◽  
Tax Reforms ◽  
Market Completeness ◽  
Durable Consumption ◽  
Poor Households ◽  
Borrowing Constraint ◽  
The Difference ◽  
Consumption Taxes

AbstractThis paper introduces durables into a dynamic general equilibrium overlapping generation model with idiosyncratic income shocks and endogenous borrowing constraints, which depend on durables. The aim of this paper is to evaluate the welfare effects of consumption tax reforms in a richer model that captures the difference between nondurable and durable consumption. When durables are considered, the standard results that a shift to consumption taxes is welfare improving are overturned. The mechanism of this opposing result is that consumption tax makes durable consumption more expensive without relaxing the borrowing constraint. The inability of borrowing to insure against income risk deviates the economy further away from market completeness and particularly hurts young and poor households. As a result, welfare decreases, coupled with negative redistribution.

Taxing the Tails in a Global Economy: How Electoral, Party and Wage Bargaining Systems Interact to Determine the Taxes Paid by the Poor and Rich

2021 ◽  
pp. 1-20
Author(s):  
Jude C. Hays
Keyword(s):  
Global Economy ◽  
Electoral Systems ◽  
Party Systems ◽  
Wage Bargaining ◽  
Labor Market Institutions ◽  
Electoral Institutions ◽  
The Poor ◽  
The Rich ◽  
Consumption Taxes ◽  
Empirical Implications

Abstract A prominent line of research on electoral systems and income redistribution argues that proportional representation (PR) leads to tax-and-transfer policies that benefit the poor at the expense of the rich. This is because PR produces encompassing center-left coalitions that protect the poor and middle classes. Yet countries with PR electoral systems tend to rely heavily on consumption taxes and tax profits lightly, both of which are inconsistent with this expectation. Both policies are regressive and seem to benefit the rich at the expense of the poor. This article argues that PR electoral institutions, when combined with trichotomous multipartism, are not as hostile to the rich as commonly believed, and that it is important to understand how electoral and party systems interact with labor market institutions in order to explain the puzzling pattern of taxation that is observed. The author develops a theoretical model and evaluates its empirical implications for a world in which production has become multinational.

scholarly journals Welfare optimization and multinational monopolies

1996 ◽  
Vol 38 (1) ◽  
pp. 16-25
Author(s):  
A. M. Russell ◽  
C. A. Martini ◽  
J. A. Rickard
Keyword(s):  
Parameter Space ◽  
Home Country ◽  
Domestic Market ◽  
Consumption Tax ◽  
Optimal Value ◽  
National Welfare ◽  
Consumption Taxes

AbstractThis paper examines the role of import tariffs and consumption taxes when a product is supplied to a domestic market by a foreign monopoly via a subsidiary. It is assumed that there is no competition in the domestic market from internal suppliers. The home country is able to levy a profits tax on the subsidiary. The objective of our analysis is to determine the mix of tariff and consumption tax which simultaneously maximizes national welfare. We show that national welfare does not have an internal maximum, but attains its maximum on a boundary of the consumption tax–tariff parameter space. Furthermore, the optimal value of national welfare increases as the tariff decreases and the consumption tax increases. The results obtained generalize the results of an earlier paper in which national welfare was maximized with respect to either a tariff or consumption tax, but not both.

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