A THEORY OF THE POLITICALLY OPTIMAL COMMODITY TAX

A theory of the politically optimal tax is developed where tax rates are endogenous and determined by forces in the political market. The theory is used to explain the levels of alcoholic beverage taxes between states in the United States. It is shown that these rates are influenced by the ownership...

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Bibliographic Details
Published in:Economic inquiry 1990-07, Vol.28 (3), p.586-603
Main Author: Seiglie, Carlos
Format: Article
Language:English
Subjects:
Alcohol
Beverages
Commodities
Econometrics
Economic models
Economic theory
Economics
Liquor industry
Liquor laws & regulations
Optimal
Sales taxes
Statistical analysis
Studies
Tax rates
Tax revenues
Taxation
Variables
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Summary:A theory of the politically optimal tax is developed where tax rates are endogenous and determined by forces in the political market. The theory is used to explain the levels of alcoholic beverage taxes between states in the United States. It is shown that these rates are influenced by the ownership structure existing in the liquor industry, the consumption externalities associated with drinking, the minimum drinking age laws, the earmarking of tax revenues, the enforcement of regulations and real income.
ISSN:0095-2583
1465-7295
DOI:10.1111/j.1465-7295.1990.tb01240.x