NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Should the Government's Allocation Branch be Concerned about the Distortionary Cost of Taxation and Distributive Effects?

Louis Kaplow

NBER Working Paper No. 4566 (Also Reprint No. r2106)*
Issued in February 1997
NBER Program(s):   PE

Does taxation for public goods generally involve a distortionary cost? Are Pigouvian taxes desirable because they raise revenue without having to resort to distortionary taxes? Should decisions concerning public goods or Pigouvian taxes depend on whether their incidence is regressive? The answer to these questions may be negative, contrary to conventional wisdom, if one considers a different and arguably more natural method of achieving budget balance than is typically assumed.

*Published: The Optimal Supply of Public Goods and the Distortionary Cost of Taxation, National Tax Journal, Vol.49, No.4, pp.513-533(1996).

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