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Welfare Effects of National Taxes in an Economy with Regions
Author(s) -
Petchey Jeffrey D.,
Levtchenkova Sofia
Publication year - 2003
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/1475-4932.t01-1-00099
Subject(s) - economics , commodity , welfare , revenue , distribution (mathematics) , indirect tax , affect (linguistics) , consumption (sociology) , production (economics) , tax revenue , value added tax , tax reform , public economics , labour economics , monetary economics , market economy , macroeconomics , finance , mathematical analysis , social science , linguistics , philosophy , mathematics , sociology
The present paper illustrates that changes in national commodity and income tax rates will affect the location choices of mobile factors of production within an economy with regions as well as the total supply of these factors to the economy. It is also argued that revenue (expenditure) neutral changes in the tax mix, for example, an increase in the commodity tax combined with a decrease in the income tax rate, will affect the domestic distribution of mobile factors, their supply to the economy and social welfare. In other words, revenue neutrality should not be used as a guide to the welfare effects of tax mix changes.