Resource title

Distortionary taxation and the free-rider problem

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Resource description

This paper derives a version of the Samuelson rule, which takes not only the marginal costs of public funds into account but also the desirability of preference revelation. Under a linear income tax more able individuals suffer from a larger utility loss if taxes are raised to cover the cost of public good provision. This implies that these individuals are tempted to understate their valuation of the public good. Likewise, less productive individuals are inclined to exaggerate their valuation. These incentive concerns require the use of excessive taxes. They ensure a truthful revelation of preferences for the public good. Under an optimal utilitarian tax constitution, individuals are not granted influence on public good provision if the taxes needed to induce informative behavior are prohibitively high.

Resource author

Felix Bierbrauer

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/26890

Resource license

Adapt according to the presented license agreement and reference the original author.