Optimal taxation strategy for durables and income based on preference diversity
The article explores how different taxes on goods and income can be designed to benefit society. By studying household choices on spending, saving, and work, the researchers found that subsidies on durable goods can be helpful in uncertain situations. The optimal tax rates on non-durable goods and income depend on people's different preferences. The model suggests that varying taxes on what people buy can help redistribute wealth and work together with income taxes to create a fairer system.