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Dynamics of commodity taxation: An example of an energy tax
Author(s) -
Wirl Franz
Publication year - 1991
Publication title -
system dynamics review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.491
H-Index - 57
eISSN - 1099-1727
pISSN - 0883-7066
DOI - 10.1002/sdr.4260070204
Subject(s) - commodity , economics , externality , revenue , tax revenue , consumption (sociology) , microeconomics , limiting , indirect tax , public economics , tax reform , market economy , finance , mechanical engineering , social science , sociology , engineering
Commodity taxation represents one means of raising public revenues. Recently, this proposal has received considerable support from environmentalists, who argue that commodity taxation, besides raising revenues, will have the positive effect of controlling externalities and limiting negative environmental side‐effects of commodity production. This article considers the dynamics of such taxation when taxpayers must solve a costly and intertemporal adjustment problem. Applying recent data from Austria, the author analytically and quantitatively explores the implications of sluggish consumption on the design of a revenue‐stable tax policy. If demand is elastic, the stability of such a tax regime is questionable for theoretical reasons. In practice, its stability may be questionable even if demand is inelastic.