Program > Papers by author > Gauthier Stéphane

Consumption taxes and taste heterogeneity
Fanny Henriet  1, 2@  , Stéphane Gauthier  1, 3@  
1 : Ecole d'Économie de Paris - Paris School of Economics  (EEP-PSE)  -  Website
Ecole d'Économie de Paris
48 boulevard Jourdan 75014 Paris -  France
2 : CNRS
CNRS : UMR8174
3 : Université Paris 1
Université Paris 1 - Panthéon-Sorbonne

We study optimal commodity taxes in the presence of non-linear income taxes when agents differ in skills and tastes for consumption. We show that commod- ity taxes are partly determined by a many-person Ramsey rule when there is taste heterogeneity within income classes. The usual role of consumption taxes in relax- ing incentive constraints explains the remaining part of these taxes when there is taste heterogeneity between income classes. We quantify the importance of these two components on Canadian microdata using a new method to identify empirically the binding incentive constraints. Incentives matter but tax exemptions are mostly justified by Ramsey considerations. 



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