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Cover von: Welfare and Inequality with Hard-to-Tax Markets
Enlinson Mattos, Laudo M. Ogura, Marcelo Arbex

Welfare and Inequality with Hard-to-Tax Markets

Rubrik: Articles
Jahrgang 71 (2015) / Heft 3, S. 371-384 (14)
Publiziert 09.07.2018
DOI 10.1628/001522115X14364466904583
Veröffentlicht auf Englisch.
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This paper examines welfare implications of hard-to-tax markets, which are endogenously determined by tax enforcement costs. We show that social welfare may be maximized by keeping some markets untaxed, even when it is still possible to collect positive net tax revenues from additional markets. The unequal burden of the tax policy can lead to negative externalities due to the inequality in consumption across individuals. A nonwelfarist planner could restrain taxation to avoid greater inequality, leading to lower provision of the public good. The provision of the public good increases as a welfarist planner chooses to expand the tax reach.