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.
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Kaplow, L. (2018). Optimal Taxation. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_1574
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DOI: https://doi.org/10.1057/978-1-349-95189-5_1574
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