Production Efficiency and Profit Taxation
Pre-print, Working paper: Consider a simple general equilibrium economy with one representative consumer, a single competitive firm and the government. Suppose that the government has to finance public expenditures using linear consumption taxes and/or a lump-sum tax on profits redistributed to the consumer. This note shows that, if the tax rate on profits cannot exceed 100 percent, one cannot improve upon the second-best optimum of an economy with constant returns to scale by using a less efficient profit-generating decreasing returns to scale technology.
Keywords JEL
Keywords
- Optimal taxation
- Taxation of profits
- Production efficiency
Internal reference
- PSE Working Papers n°2017-45
URL of the HAL notice
Version
- 1