Optimal Taxation

Research Report

Optimal Taxation

From The Encyclopedia of Taxation and Tax Policy
September 30, 1999


Optimal taxation is a set of normative prescriptions for tax policy usually based on maximizing social welfare for a given revenue requirement. Optimal tax theory addresses such questions as: Should the government use income or commodity taxes? Within commodity taxes, how should tax rates vary across commodities? How progressive should the tax system be? Optimal tax theory encompasses a range of models that focus on particular aspects of the tax system.

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