ABSTRACT
R am sey and Paul Sam uelson.5 Our results m ove beyond theirs in considering the problem of incom e redistribution together w ith th a t of raising revenue. E ven in the absence of governm ent revenue require m ents, if lum p sum redistribution is im possib le, the governm ent w ill w ant to use its excise tax powers to im prove incom e distribution . I t will subsidize and tax different goods so as to alter individual real incom es. T he optim al redistribution b y this m ethod occurs when there is a balance betw een the equity im provem ents and the efficiency losses from further taxa tion.
