New tax rule maximizes social welfare and economic efficiency for all
Commodity taxes serve three main purposes: collecting money, redistributing wealth, and managing resources. A new rule called the 'generalised Ramsey rule' has been developed to help determine the best way to tax goods. By looking at how taxes affect the economy as a whole, researchers have found that many common ideas about taxes still apply in this new framework. They have also shed light on how different ways of distributing wealth can impact the best tax strategies.