Redistribution, Observability and Different Tax Systems

Abstract

In this chapter we will totally dispense with normative criteria as used in chapter one to determine equitable and efficient allocations. Instead of we will scrutinize which allocations are attainable, or implementable at all, if different kinds of taxes are available. The scopes of redistribution provided by the different taxes are compared with each other. Again we start with finite economies and go over to continuum economies. We will confine ourselves to “first best redistribution” although we see very clearly that the exploration had to be expanded to include second best solutions, too. This chapter is therefore a necessary, yet only first step in comparing different tax systems.