In the absence of an ability to use lump-sum taxes
, the optimal commodity tax structure is provided by Ramsey (1927).
In the absence of intergenerational redistribution through lump-sum taxes
and transfers, the constrained efficient competitive equilibrium requires optimal distortions on relative prices.
In this situation, the Second Welfare Theorem breaks down: Lump-sum taxes
are insufficient to achieve any division of the gains from trade other than the one implied by the competitive market mechanism.
We also allow governments to use lump-sum taxes
to finance public pollution abatement.
Neoclassical growth models predict positive growth effects throughout the entire transition path after a reduction in capital or labor tax rates when lump-sum taxes
or transfers are used to balance the government budget.
Likewise, in contrast to the monetary policy literature with lump-sum taxes
, the authors find that, in their model, a government spending shock creating fiscal stress affects the optimal path of inflation and the output gap.
Governments have many tax tools at their disposal to redistribute wealth from one segment of the population to another, such as income, sales, and lump-sum taxes
(for example, setup fees for corporations).
If our model is expanded to include lump-sum taxes
, increases in G financed by lump-sum taxes
borne only by the donor will completely crowd out donations.
A well-known conclusion in the theory of international trade is that having tariffs is not an optimal policy for a small country unable to influence terms of trade if collection costs of taxes can be disregarded and lump-sum taxes
or indirect taxes on all commodities are possible.
t] are, respectively, period t wage earnings and lump-sum taxes
At the same time, this literature typically ignores the fiscal consequences of alternative monetary policies; the characterizations of optimal monetary policy that are obtained thus are strictly correct only for a world in which lump-sum taxes
t] (t [greater than or equal to] 0) as a generation t- specific lump-sum tax paid in period t such that for generation t lifetime lump-sum taxes