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This paper re-examines the optimal tax design problem (income and commodities) in the presence of externalities. The nature of the second-best, and the choice of the tax instruments, are motivated by the informational structure in the economy. The main results are: (i) environmental levies (linear or nonlinear) differ in formula from Pigouvian taxes by the expressions for the optimal tax on private goods; (ii) externalities do not affect commodity tax formulas (linear and nonlinear) for private goods; (iii) externalities do not affect the income tax structure if commodity taxes are nonlinear and affect it if commodity taxes are linear; and (iv) a general income tax plus strictly Pigouvian taxes are sufficient for efficient taxation if individuals of different types have identical marginal rates of substitution (at any given consumption bundle).
A growing literature has shown that behavioral biases influence consumer choices. Such socalled internalities are ubiquitous in many settings, including energy efficiency investments and the consumption of sin goods, such as cigarettes and sugar. In this paper, we use a mechanism design approach to characterize the optimal non-linear tax (or subsidy) for correcting behaviorally biased consumers. We demonstrate that market choices are informative about consumers' bias, which can be exploited for benevolent price discrimination via a non-linear tax schedule. We derive that such "internality revelation" depends on two sufficient statistics: the correlation between valuations and biases, as well as the signal-to-noise ratio of the bias. Furthermore, we find that there must be a minimum alignment of preferences among the designer and the consumer to ensure internality tax implementability. We contrast our results with the insights from standard non-linear income taxation and discuss that the optimal corrective tax schedule is typically convex. In addition, we apply our findings to the light bulb market and determine the optimal non-linear subsidy for energy efficiency.
An important result due to Atkinson and Stiglitz (1976) is that differential commodity taxation is not optimal in the presence of an optimal nonlinear income tax (given weak separability of utility between labor and all consumption goods). This article demonstrates that their conclusion holds regardless of whether the income tax is optimal. In particular, given any commodity tax and income tax system, differential commodity taxation can be eliminated in a manner that results in a Pareto improvement. Also, differential commodity taxation can be proportionally reduced so as to generate a Pareto improvement. In addition, for commodity tax reforms that do not eliminate or proportionally reduce differential taxation, a simple efficiency condition is offered for determining whether a Pareto improvement is possible.
"Suppose that poverty is a negative externality affecting individuals' welfare. How does the introduction of concern about poverty affect the income tax policy of a social planner?"--Cover.
This guideline provides updated global, evidence-informed recommendations on the intake of free sugars to reduce the risk of NCDs in adults and children, with a particular focus on the prevention and control of unhealthy weight gain and dental caries. The recommendations in this guideline can be used by policy-makers and programme managers to assess current intake levels of free sugars in their countries relative to a benchmark. They can also be used to develop measures to decrease intake of free sugars, where necessary, through a range of public health interventions. Examples of such interventions and measures that are already being implemented by countries include food and nutrition labelling, consumer education, regulation of marketing of food and non-alcoholic beverages that are high in free sugars, and fiscal policies targeting foods and beverages that are high in free sugars. This guideline should be used in conjunction with other nutrient guidelines and dietary goals, in particular those related to fats and fatty acids (including saturated fatty acids and trans-fatty acids), to guide development of effective public health nutrition policies and programmes to promote a healthy diet.
This paper deals with the consequences of the assumption of negatively interdependent preferences for the shape of the optimal nonlinera income tax and the efficient level of public good provision in a setting where the policy maker maximizes an inequality averse social welfare function and the agents' market ability is private information. The analysis points out that the terms added in the tax formulas due to the presence of Veblen effects might justify a reduction in the optimal marginal tax rates faced by the different individuals. Also, the desirability of negative marginal tax rates cannot de ruled out. With respect to the issue of the optimal level of public good provision, we derive a modified Samuelson rule and highlight the fact that the Veblen-based part of the formula might require to distort downwards the efficient level of public good provision.
The book explains in depth the Mirrlees model itself and presents various extensions of it. One set of extensions considers changing the preferences for consumption and work: behavioural-economic modifications (such as positional externalities, prospect theory, paternalism, myopic behaviour and habit formation) but also heterogeneous work preferences (besides differences in earnings ability). Another set of modifications concerns the objective of the government. The book explains the differences in optimal redistributive tax systems when governments, instead of maximising social welfare, minimise poverty or maximise social welfare based on rank order or charitable conservatism social welfare functions. In all extensions, the book illustrates the main mechanisms using advanced numerical simulations.