Optimal Taxation and Public Production II: Tax Rules

TLDR

Part I covered five sections; Part II begins at Section VI and restates the notation and basic problem. The paper investigates how taxation and government production can be structured to maximize a social welfare function, examining commodity taxes, other tax forms, public consumption, and providing rigorous conditions for optimality. Sections VI–X analyze commodity taxation in one‑ and many‑consumer economies, other tax types, public consumption, and present a rigorous treatment yielding sufficient conditions for the validity of first‑order conditions. The authors.

Abstract

set out the problem of using taxation and government production to maximize a social welfare function. We derived the first-order conditions, and considered the argument for efficiency in aggregate production. Here in Part II we consider the structure of optimal taxes in more detail. Part I contained five sections, and Part II begins at Section VI. In the sixth and seventh sections we consider commodity taxation in one- and many-consumer economies. In the eighth section we consider other kinds of taxes; and in the ninth, public consumption. In the tenth section we consider a rigorous treatment of the problem, giving a sufficient condition for the validity of the first-order conditions. To begin, we shall restate the notation and basic problem. Notation