Working Paper
On the Equivalence between Labor and Consumption Taxation
Paolo Panteghini
CESifo, Munich, 2009
CESifo Working Paper No. 2593
CESifo, Munich, 2009
CESifo Working Paper No. 2593
This article studies the equivalence between labor and consumption taxes in a stochastic context, where the government can undertake an active portfolio management strategy by investing in both risk-free and risky assets. Using a two-period model we show that such taxes let consumers make the same decisions, and can finance the same amount of government spending in each period.
CESifo Category
Public Finance
Public Finance
Keywords: consumption and labor taxation, equivalence, risk
JEL Classification: H240