Scandinavian Working Papers in Economics
Umeå Economic Studies,
Umeå University, Department of Economics
No 1009: A Note on Optimal Taxation under Status Consumption and Preferences for Equality
Thomas Aronsson (), Tomas Sjögren () and Sonal Yadav ()
Additional contact information
Thomas Aronsson: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden
Tomas Sjögren: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden
Sonal Yadav: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden
Abstract: This note analyzes optimal taxation when (i) a fraction of people has positional preferences, and (ii) concerns for relative consumption and preferences for equality are operative simultaneously. We show that incentive compatibility motivates a regressive marginal tax structure, which in the end implies that people with positional preferences are taxed at a lower marginal rate than people without such preferences. A counteracting mechanism arises if those who are not concerned with their relative consumption have preferences for income-equality, even if people with positional preferences should still be taxed at a lower marginal rate than motivated by their contributions to externalities.
Keywords: Optimal taxation; relative consumption; equality
Language: English
14 pages, September 13, 2022
Full text files
ues1009.pdfFull text
Questions (including download problems) about the papers in this series should be directed to David Skog ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2024-02-05 17:13:52.