Consumption vs. wage taxation and the capital levy

Based on a representative consumer framework, it has been argued that wage taxation is inferior to consumption taxation. This note shows that the opposite result may emerge in a model where households are heterogeneous and where a uniform (poll) tax or subsidy is available.

Gaube, Thomas and Robert Schwager (2003), Consumption vs. wage taxation and the capital levy, Economics Letters 79 , 15-19