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Saturday, February 15, 2020 | History

2 edition of Optimal commodity taxes under rationing found in the catalog.

Optimal commodity taxes under rationing

Nanak Kakwani

Optimal commodity taxes under rationing

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  • 1 Currently reading

Published by Population and Human Resources Dept., World Bank in Washington, DC (1818 H St. NW, Washington 20433) .
Written in English

    Subjects:
  • Taxation of articles of consumption -- Mathematical models.,
  • Tax incidence -- Mathematical models.,
  • Welfare economics -- Mathematical models.

  • Edition Notes

    StatementNanak Kakwani and Ranjan Ray.
    SeriesPolicy, planning, and research working papers ;, WPS 203
    ContributionsRay, Ranjan, 1949-
    Classifications
    LC ClassificationsHJ5711 .K34 1989
    The Physical Object
    Pagination23 p. ;
    Number of Pages23
    ID Numbers
    Open LibraryOL1901535M
    LC Control Number90102490

    Diamond and Mirrlees came to the conclusion that the marginal tax rate for the top earner should be equal to zero and the optimal rate must be between zero and one. Taxation of capital in any form: above all financial instruments, assets then property was proposed as most optimal by Thomas Piketty. This differential taxation of commodities may cause inefficiency by discouraging work in the market in favor of work in the household. At that point, Apple might be forced to reduce the price of that model. Third, it combines the three discussions: the welfare theory, the contributions of the regulations and public finance. Mankiw argues that Diamond's and Mirrlees's theory is extremely complex because of how difficult it is to keep track of individuals producing at their maximum levels.

    After the Schedule D worksheet is completed, transfer the numbers to your Form and you are done. The problem is closely linked to the problem of socially optimal monopolistic pricing when profits are constrained to be positive, known as the Ramsey problem. Baumol and David F. First, prices in uncontrolled sectors rise disproportionately. Yet, because it is difficult to see tangible results of deadweight loss, policy makers largely ignore it.

    Continue to the place on the form where you add the profits and losses to get a final number. So through generational accounting, it is possible to analyze this and provide the necessary information for policy makers to change the policies needed to alter this trend. A practical application of this, for example, is implementing value-added taxes, a tax on the purchase price of a good or service, to correct tax evasion. This implies that, good X1 is an inferior good as the demand for X1 fell with an increase in the income of the consumer. In an attempt to reduce excess burden of consumption taxes, Ramsey proposed a theoretical solution that consumption tax on each good should be "proportional to the sum of the reciprocals of its supply and demand elasticities ".


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Optimal commodity taxes under rationing book

The income effect is a phenomenon observed through changes in purchasing power. Therefore, it is always wise to consult a tax professional who is a CPA to assist you in preparing and filing returns to make sure that you are in full compliance with the law while taking advantage of all benefits allowed under the tax code.

Lump-sum taxes can be either progressive or regressive, depending on what the lump sum is being applied to. After the Schedule D worksheet is completed, transfer the numbers to your Form and you are done. Any gain in economic efficiency from shifting taxes to consumption may be quite small, while the adverse effects on income distribution may be large.

Stocks are treated differently, and anything held less than 12 months is considered short-term capital gains and taxed at whatever rate is appropriate for your tax bracket. These programmes include duty drawbacks and duty remission. Third, reaching an optimal tax level could mean flat taxes.

The study found that using uniform prices for all products in a product line is the best pricing policy.

If supply exceeds demand, the price falls as producers try to induce more people to buy the product. The welfare effect - an increase in tax-rate reduces the individual utility, and thus reduces social welfare.

Optimal commodity taxes under rationing

The figure 1 on the left shows the consumption patterns of the consumer of two goods X1 and X2, the prices of which are p1 and p2 respectively. Commodity taxes[ edit ] Frank P. A tax on the unimproved aspects of land tends to be a progressive tax, since the wealthier one is, the more land one tends to own and the poor typically do not own any land at all.

We have no references for this item. Other weapons of price control are taxation to raise prices and subsidies to reduce prices. The behavioural effect - an increase in tax-rate discourages labour supply, and this leads to lower tax revenue as a result.

Moreover, the sale does not occur, so the government never collects the revenue that was the whole reason for the distortion. Sales tax[ edit ] A third consideration for optimal taxation is sales tax, which is the additional price added to the base price of a paid by the consumer at the point when they purchase a good or service.

This implies that, good X1 is an inferior good as the demand for X1 fell with an increase in the income of the consumer. It also allows you to accept potential citations to this item that we are uncertain about.

The equilibrium price is OP0 and the equilibrium quantity is OQ0. In an attempt to reduce excess burden of consumption taxes, Ramsey proposed a theoretical solution that consumption tax on each good should be "proportional to the sum of the reciprocals of its supply and demand elasticities ".

It also allows you to accept potential citations to this item that we are uncertain about. This provides the correct incentives for individuals to work at their optimal level. Do not despair; it should be a painless process once you know which forms you need to use.

In the figure, this means that the change in the money income of the consumer will shift the budget line B1 outward parallel to itself to B2 where the bundle X' bundle will be chosen. A tax placed on car tags would be regressive because it would be the same for everyone regardless of the type of car the owner purchased and, at least in the United States, even the poor own cars.

This would result in excess supply. For example, if Apple charged a higher price for a silver MacBook Pro versus a space gray MacBook Pro, demand for the silver model might fall and the supply of the silver model would increase.

Second, the more income an individual makes, their marginal tax schedule could actually decrease because they are discouraged from working at their optimal production level.Optimal tax theory or the theory of optimal taxation is the study of designing and implementing a tax that maximises a social welfare function subject to economic constraints.

The social welfare function used is typically a function of individuals' utilities, most commonly some form of utilitarian function, so the tax system is chosen to maximise the aggregate of individual utilities.

Commodity Taxation

Optimal Taxation: (a) Ramsey’s Rules for Optimal Commodity Taxation The theory of optimal taxation is really an extension of the material in the previous chapter on e ciency: taxes have an excess burden, unless they are lump{sum taxes ; lump{sum taxation is impossible ; so how should taxes be designed so as to minimize the excess burden?

Econ A: Public Economics Lecture: Deadweight Loss & Optimal Commodity Taxation 1 Hilary Hoynes UC Davis, Winter 1These lecture notes are partially based on lectures developed by Raj Chetty and Day Manoli.

Many thanks to them for their generosity. Is the price system or rationing more effective in getting a commodity to those who need it most? Martin L. Weitzman f'rot'cssor of' FIconoinics MalssatchLusetts InstitLUte of'l'cchnology Using a simplef ormal model, the present paper analyzes under what conditions the price systetm or (rude r ationing.

USER PRICES VS. TAXES 1. A virtue of rationing services by the price mechanism is that such a procedure permits obtaining information regarding how users value these services relative to other things that they might obtain.

The optimal commodity tax structure in a four

Basic Welfare Economics and Optimal Tax Theory taxes. Optimal taxation generally refers to tax policies that minimize the DWL of the tax system. However, we may also want to consider what is optimal, or best, from the equity point of view.

The goals of both e¢ ciency and equity may not be served by the same tax system. For example, lump.