Open Access Journal Article

Welfare Effects of Commodity Taxation

by Fritz Helmedag a,* orcid
Economics Department, Chemnitz University of Technology, Chemnitz, Germany
Author to whom correspondence should be addressed.
Received: 17 February 2023 / Accepted: 30 March 2023 / Published: 31 March 2023


In reality firms most often face negatively sloped demand curves. Then, for a given level of consumers’ surplus, levies on prices yield higher fiscal revenues than specific duties. Therefore, according to the prevailing view, the switch from unit to ad valorem taxation is supposed to generate more welfare; some even speak of an associated Pareto-improvement. However, this is not true because taxing prices merely transfers profits to the Treasury, while total rent remains unaffected. Since excise duties diminish the welfare gain in comparison with untaxed trade, an appropriately designed income tax allows all parties to benefit. Sales should be taxed only exceptionally.

Copyright: © 2023 by Helmedag. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
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ACS Style
Helmedag, F. Welfare Effects of Commodity Taxation. Journal of Economic Analysis, 2023, 2, 22.
AMA Style
Helmedag F. Welfare Effects of Commodity Taxation. Journal of Economic Analysis; 2023, 2(2):22.
Chicago/Turabian Style
Helmedag, Fritz 2023. "Welfare Effects of Commodity Taxation" Journal of Economic Analysis 2, no.2: 22.
APA style
Helmedag, F. (2023). Welfare Effects of Commodity Taxation. Journal of Economic Analysis, 2(2), 22.

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