RT Journal Article
SR Electronic
T1 Funding Public Goods through Dedicated Taxes on Private Goods
JF Land Economics
JO Land Econ
FD University of Wisconsin Press
SP 428
OP 439
DO 10.3368/le.98.3.082721-0101
VO 98
IS 3
A1 Nathan W. Chan
A1 Matthew J. Kotchen
YR 2022
UL http://le.uwpress.org/content/98/3/428.abstract
AB We examine dedicated taxes (i.e., taxes on private goods used to finance public good provision) in a game-theoretic model of impure public goods. We show that a dedicated tax can increase or decrease demand for the taxed good. The optimal dedicated tax generally cannot achieve the Pareto-optimal allocation, but it can generate a conditionally efficient equilibrium with comparatively more or less public good provision, depending in part on complementarity or substitutability between the private and public good. We also demonstrate a neutrality result: when individuals can make direct donations, sufficiently low dedicated taxes will not impact equilibrium allocation.