Affiliation:
1. University of Bonn
2. University of Göttingen and Centre for European Economic Research, Mannheim
Abstract
Is it possible to replace the income tax by a consumption tax or a wage tax such that (1) a dynamic (intergenerational) Pareto improvement is obtained and (2) only the information available from enforcing the income tax is used? In this article, it is shown that such a transition is feasible if and only if in a static setting, the consumption or wage tax induces less distortions than the income tax.
Subject
Public Administration,Economics and Econometrics,Finance
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