Abstract
Abstract So far we have focused our attention on the design of a labour income tax. Other tax and expenditure policies are also often used for the purposes of redistribution. The balance between income taxation and other taxation is undoubtedly one of the oldest issues in taxation policy. In this chapter the interrelation of income tax with other instruments of tax and expenditure policy will be considered in the light of modern optimal tax theory. It is almost conventional wisdom that income taxation is superior as an instrument of redistribution. Commodity taxes, public-sector pricing, and the supply of public goods have been regarded only as a means of allocating resources, not for redistribution. One of the purposes of this chapter is to see how these beliefs hold when income taxation and other instruments are considered in an integrated model.
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