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The theory of optimal taxation: what is the policy relevance?

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Abstract

The paper discusses the implications of optimal tax theory for the debates on uniform commodity taxation and neutral capital income taxation. While strong administrative and political economy arguments in favor of uniform and neutral taxation remain, recent advances in optimal tax theory suggest that the information needed to implement the differentiated taxation prescribed by optimal tax theory may be easier to obtain than previously believed. The paper also points to the strong similarity between optimal commodity tax rules and the rules for optimal source-based capital income taxation.

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  1. Department of Economics, University of Copenhagen, EPRU og CESifo, 1455, Copenhagen, Denmark

    Peter Birch Sørensen

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  1. Peter Birch Sørensen
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Correspondence to Peter Birch Sørensen.

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Sørensen, P.B. The theory of optimal taxation: what is the policy relevance?. Int Tax Public Finance 14, 383–406 (2007). https://doi.org/10.1007/s10797-007-9024-1

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