Essays on economics of taxation

The first chapter is an introduction and overview. Using the CES utility function, Chapter 2 numerically examines the relationship between the optimal tax-and-transfer systems and inequality of earnings under major alternative social welfare functions. In a one-bracket linear tax system, both the optimal income tax rate and the government transfer increase when earning inequality expands. In the two-bracket case, the optimal lower bracket rate and income threshold do not change in a way that is monotonic. The optimal upper bracket rate and government transfer increase with the wage spread. The lower bracket rate is greater than the upper bracket one when the spread is small, but it is larger when the spread is large. With a large elasticity of substitution between consumption and leisure, the two-bracket tax structure converges to the one-bracket case when the wage spread becomes large.; Chapter 3 examines the distributional effects of an environmental tax on the price system in a spatial model of a closed city. "Social welfare" is defined over identical residents and is affected both by environmental quality and by the rent paid to absentee landlords. The tax improves environmental quality everywhere. However, it reduces the equilibrium wage. As the tax rate rises from low to high, the tax first improves social welfare until it hits the optimal level, and then it reduces welfare. The tax first makes the city boundary shrink, but then makes it grow. Initial increases of the tax pull down the rent for any particular location in the city, and further increases pull the rent back up.; Chapter 4 empirically tests the effect of the extra corporate tax on the choice of organizational form between corporate and non-corporate form. The overall extra corporate tax rate has significantly negative effects on the corporate share of economic activity such as capital stock and investment. My estimated effect on the corporate share of capital stands just between two major estimates in the literature; while the effect on the corporate share of investment is much larger than that on capital. The results are consistent with transaction costs in two respects: first, the corporate share of capital stock does show adjustment lags; second, the extra tax shows larger effect on the corporate share of investment than on that of capital stock.