Essays on Optimal Taxation in Theory and Practice Case Study

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The paper 'Optimal Taxation in Theory and Practice' is a great example of a Macro and Microeconomics Case Study.   The world’ s economy has dramatically grown over the years (Budd, 2004). One key reason for the rapid growth of the economy is the fact that governments and business people have put their efforts on economy efficiency more than equity. Even though economic efficiency has undergone improvement, a good number of social issues related to equity have occurred. For example, income gap existing between rich states and poor states which can result to unbalance of the global economy and politics has increased over the years (Wilkinson and Pickett, 2010).

The important principles of economics are based on the fact that society faces trade-offs; a common trade-off existing is between efficiency and equity goals (Mankiw, 2012). This means that it is very difficult to achieve efficiency and equity goals simultaneously. The manner in which taxes are raised and the purpose it is put the result in trade-off between equity and efficiency. This essay will define efficiency and equity and then analyze and evaluate how it is very difficult to achieve equity and efficiency goals on the bases of taxation. Taxation can be defined as a system that a particular government utilizes to collect taxes from business organizations and individuals with relation to their income, earnings, transaction, and asset values (Cch, 2008).

Fundamentally, taxation is used to raise revenue that does not promote beneficial activities for the government including starting a business that limits undesirable behavior or promote education, etc. Taxpayers most often than not hesitate to take time and effort to conform to the tax code or pay taxes.

In order to palliate the impacts of taxation on individuals, tax policy often strives to achieve the objective of efficiency and equity. Tax efficiency reduces the cost of conforming to the tax code by minimizing its administrative burden and any distortions in the economy influenced by the tax. Minimizing the administrative burden benefits both the taxpayers and the economy as tax collection is just a requirement and not an objective of tax policy (Cch, 2008).


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Mankiw N.G. (2012),"Principles of Economics", 6th Edition.

Mankiw, N.G., M.C. Weinzierl and D. Yagan (2009), .Optimal Taxation in Theory and Practice., Journal of Economic Perspectives, 23, 147.174.

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Wilkinson, R. & Pickett, K. (2010). The spirit level why greater equality makes societies stronger. New York: Bloomsbury Press

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