Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/80144
Authors: 
Page, Talbot
Zhang, Qinghua
Year of Publication: 
2003
Series/Report no.: 
Working Paper, Brown University, Department of Economics 2003-11
Abstract: 
We find a limited parallel between lump-sum taxes and environmental taxes. Corollary 2, which extends Sandmo’s observation, shows that appropriated corrective revenues have the same non-distortionary effects as lump-sum taxes, the result reducing to the original observation when the appropriated corrective revenues meet the revenue need and achieve first-best efficiency with other taxes set at zero. Corollary 1 finds that when the corrective part of environmental taxes is used as marginal damage compensation, the non-corrective part is distortionary and symmetric with ordinary proportional labor taxes in second-best equilibria. The extension of Sandmo’s observation suggests that environmental taxes may be among the least distortionary taxes in the tax system.
Subjects: 
Environmental taxes
Pigovian taxes
Lindahl prices
second-best taxes
distortionary taxes
lump-sum taxes
JEL: 
D58
D62
H23
L51
Q2
Q48
Document Type: 
Working Paper

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