Welfare and optimum dynamic taxation of consumption and income

Journal Article (Journal Article)

This paper estimates that the US could attain large welfare gains by implementing an optimal Ramsey tax policy that taxes consumption and income. It is also found that the welfare implications associated with taxing consumption are quantitatively more important than those associated with dynamically taxing income. Indeed, replacing income taxes with a constant consumption tax leads to a welfare gain that is only slightly lower than that attained by a dynamic policy that taxes consumption and income. In computing these welfare gains, careful attention is given to the dynamic path of tax rates and the transitional dynamics associated with how the economy responds to a new tax policy. © Elsevier Science S.A.

Full Text

Duke Authors

Cited Authors

  • Coleman, WJ

Published Date

  • January 1, 2000

Published In

Volume / Issue

  • 76 / 1

Start / End Page

  • 1 - 39

International Standard Serial Number (ISSN)

  • 0047-2727

Digital Object Identifier (DOI)

  • 10.1016/S0047-2727(99)00043-2

Citation Source

  • Scopus