
handle: 10419/155029 , 11568/1158447
Tax earmarking imposes a constraint on government policymaking, and may be desirable if it solves a time-inconsistency problem in tax policy. In a two-period economy, in which the policy decisions regarding taxes, public goods provision, and pollution abatement are taken by a majority-elected individual, we show how the time-inconsistency problem in environmental policy arises. We demonstrate that the commitment equilibrium under no earmarking rules cannot be as fully implemented as a no-commitment equilibrium under earmarking rules. However, the earmarking rules do act as a partial commitment mechanism.
environmental tax, ddc:330, time inconsistency, redistributive taxation, taxation; environmental policy; fiscal policy; environmental tax; pollution, Tax earmarking, D72, SDG 17 - Partnerships for the Goals, D62, environmental policy, endogenous taxation, pollution, H20, taxation, E62, fiscal policy, pollution abatement, jel: jel:D62, jel: jel:E62, jel: jel:D72, jel: jel:H20
environmental tax, ddc:330, time inconsistency, redistributive taxation, taxation; environmental policy; fiscal policy; environmental tax; pollution, Tax earmarking, D72, SDG 17 - Partnerships for the Goals, D62, environmental policy, endogenous taxation, pollution, H20, taxation, E62, fiscal policy, pollution abatement, jel: jel:D62, jel: jel:E62, jel: jel:D72, jel: jel:H20
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