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Suppose you write some software that you can then freely sell at practically no cost per unit (the wonders of the internet). You want to make as much profit as possible. Since you have almost no per unit cost, maximizing your profit will amount to maximizing the revenue, the price per unit times the number of units sold. Note what did not enter the ...


5

A little background. The paper relates to a tax (known as the Soft Drinks Industry Levy) introduced by the UK in 2018 on some soft drinks, levied on manufacturers (not consumers), with the aim, according to the government, of encouraging manufacturers to reduce the sugar content of drinks and reduce portion sizes of added sugar drinks, and so contribute to ...


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This answer simply points out what is, I think, an important part of 1muflon1's answer. There are two ways to think of consumption taxes: One is to tax certain consumption goods with a VAT. Making this progressive is an uphill battle and will cause a lot of distortions that have little to do with distributional concerns. On the other hand, you can simply tax ...


4

Correcting Misconceptions in the Question: Before providing an answer it is worth noting the premise in your question is simply incorrect. You state: I have heard that introducing capital gains taxes would create distortions in investments, and that the optimal tax rate for capital gains is actually 0. But this is not rationale for the famous 0 capital ...


3

Trying to make consumption taxes more progressive is not impossible but it is uphill battle since any consumption tax is inherently regressive since lower income people spend larger share of their income on consumption than higher income people (see discussion of this in Blanchard et al. Macroeconomics: A European Perspective). Probably the most ...


3

Indeed the debt tax shield is distorting. Any policy that will essentially distort prices to favor A over B will lead to too much A and too little B. So such differentials are (almost) always distorting (unless you actually want less B and more A due to externalities). Here the tax deductibility makes debt cheaper compared to equity. We know this is ...


3

I give here the procedure but with price $p=1$ you can do it yourself without that simplification. Set up Lagrange $$\mathcal L(c,l,\lambda) = u(c,l) - \lambda (c-\bar w(1-t)(24-l)) $$ clearly $$\frac{\partial \mathcal L }{\partial c} = \frac{\partial u}{\partial c} - \lambda = 1- \lambda$$ so $\lambda=1$ and constraint is binding. Therefore $$c^\star = \bar ...


3

You question can be answered using a revealed preference argument. Let $B = \{q \in \mathbb{R}^n_+| p' q \le m\}$ be some budget set of a consumer (i.e. $B$ gives all possible bundles that the consumer can choose). Let $q^\ast$ be the optimal choice from $B$, i.e. the bundle that optimizes the utility. Then for any other bundle $q \in B$, it must be that $u(...


3

I understand the negative effect on the market specifically, but won't those who decide not to participate in the market being taxed simply spend their money in another market, thus not affecting society as a whole adversely? Generally no with an exception of some special cases. Spending them at a different market than they originally wanted is precisely ...


2

First correction of various misconceptions: Since Nixon went off the gold standard the U.S. dollar has been a fiat currency backed by federal debt. U.S. dollar is not backed by federal debt, and in general fiat currencies by definition of the word are not backed by anything (see Wallace 2017). Also, generally if money is backed by something it has to be ...


2

I don't understand how is this even a reform, because as per this answer and the Wikipedia page for agricultural subsidies, developed countries are surely spending much more than India on per capita basis and China and US must be spending much more in absolute numbers. Just because developed countries have some policies that does not mean they are good ...


1

It depends on the parameters of the Romanian economy. There are no publicly available estimates of relevant parameters for the Romanian economy, but using some reasonable assumptions answer would be no (aside of economic incentives that politicians face), in fact, there is economic rationale that would be exactly the opposite. One of the most basic optimal ...


1

Fiat means "decree". William F. Hummel, a retired engineer, in the recent past published articles on money and credit systems. He has since retired from public discourse. This is an entry which discusses the evolution from a gold standard to so-called fiat money in the United States (when the State makes gold or silver coin the metal standard this ...


1

Your second link actually mentions the data I thought might be helpful here: Consumer Expenditure Survey From the link https://engaging-data.com/household-spending-income/ Data and Tools: Data on consumer spending was obtained from the BLS Consumer Expenditure Surveys, and aggregation and calculations were done using javascript and code modified from the ...


1

It is actually a little bit more complex because there are special cases where there might be no tax burden shifting (see discussion in Mankiw Principles of Economics ch 12) although, generally speaking the statement of D. Friedman would be correct. As to why government does that, besides incompetence that should not be too casually dismissed, there might be ...


1

tl;dr No they do not for several reasons: Your post is based on misinformation, I know of no work on optimal income taxation that would aim to 'equalize sacrifice' (heck you would not find such philosophy even among most relevant moral/political philosophies). Consequently, the whole premise is false, and you would not even expect to see arguments in favor ...


1

Consumption taxes could actually be made more progressive by increasing the progressivity of income taxation... One property of the Marshallian demand functions is that: $$x^M\big(p,(1-t(y))y\big)=x^M \big( \frac{1}{1-t(y)}p,y \big),$$ with standard notations. It follows that there is a bijection between a (progressive) income tax rate $t(y)$ and a ...


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Technincally, even if it's a stylized fact that has been subject to a lot of criticism (and, to me, very righteously), the Laffer curve indicates that a 100% tax rate on land would generate zero revenue, since there would be no incentive for the owner to use productively. In that case I think that Laffer's intuition of a zero revenue on a 100% tax rate is ...


1

Shares, and many other financial instruments as well, are financial assets assets, through which people save not consumption of goods and services. Consequently, neither GST (goods and services tax) or value added tax (which is in economics a type of consumption tax) can apply to stocks or many other financial instruments as they do not represent ...


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The acronym itself might be new but the idea actually predates 2009, and is generally rejected in mainstream economics. For example, see Feldstein (1977) which shows that in fact even tax on pure land rents can be shifted onto other factors, which implies that all taxation can't be just shifted onto land. ——————————————————— This part addressed question if ...


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