The optimal mix of taxes on money, consumption and income

Fiorella De Fiore and Pedro Teles

No WP-02-03, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: We determine the optimal combination of taxes on money, consumption and income in transactions technology models where exogenous government expenditures must be financed with distortionary taxes. We show that the optimal policy does not tax money, regardless of whether the government can use as alternative fiscal instruments an income tax, a consumption tax, or the two taxes jointly. These results are at odds with recent literature. We argue that the reason for this divergence is an inappropriate specification of the transactions technology adopted in the literature.

Keywords: Consumption (Economics); Income; Taxation (search for similar items in EconPapers)
Date: 2002
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Related works:
Journal Article: The optimal mix of taxes on money, consumption and income (2003)
Working Paper: The Optimal Mix of Taxes on Money, Consumption and Income (2002)
Working Paper: The optimal mix of taxes on money, consumption and income (2002)
Working Paper: The Optimal Mix Of Taxes on Money, Consumption and Income (1999)
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